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Balance Sheet #3
We reviewed the balance sheet for VWV in the prior module.
This time we are examining the income statement for the same
entity.
VWV Company
Income Statement
For the Period Ending December 31, 20XX
Revenues
$540,000
Cost of goods sold
200,000
Gross profit
$340,000
Operating expenses
Salaries
$100,000
Lease for office
30,000
Advertising and promotion
24,000
Utilities
9,700
Property taxes
18,000
Payroll taxes
11,500
Insurance
8,000
Depreciation
19,922
Miscellaneous expenses
9,000
Total operating expenses
$230,122
Operating income
$109,878
Interest income
$250
Interest expense
12,000
Net interest expense
$11,750
Net income
$98,128
Use the above income statement to answer the questions below.
1. Is VWV a manufacturer/reseller or a service company?
2. Explain the term cost of goods sold in your own words. Why
is this item significant?
3. Does the company have employees?
4. Does the company own some type of property? Can we tell
from looking at the income statement alone or do we need to
look at the balance sheet too?
5. Are earnings per share important information for VWV
Company?
6. How do the dividends affect the income statement?
7. How do we know that VWV Company is using the accrual
basis of accounting? Hint: Do not forget to look at the balance
sheet from the prior module.
8. Why is the company using the accrual basis of accounting
rather the cash basis?
9. Comment on operating income versus net income.
SLP Assignment Expectations
Use Word and respond in a question and answer format. There
is no need to use Excel for this particular SLP.
Balance Sheet #3We reviewed the balance sheet for VWV in the pri.docx

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Balance Sheet #3We reviewed the balance sheet for VWV in the pri.docx

  • 1. Balance Sheet #3 We reviewed the balance sheet for VWV in the prior module. This time we are examining the income statement for the same entity. VWV Company Income Statement For the Period Ending December 31, 20XX Revenues $540,000 Cost of goods sold 200,000 Gross profit $340,000 Operating expenses Salaries $100,000 Lease for office 30,000 Advertising and promotion 24,000
  • 2. Utilities 9,700 Property taxes 18,000 Payroll taxes 11,500 Insurance 8,000 Depreciation 19,922 Miscellaneous expenses 9,000 Total operating expenses $230,122 Operating income $109,878 Interest income $250 Interest expense 12,000
  • 3. Net interest expense $11,750 Net income $98,128 Use the above income statement to answer the questions below. 1. Is VWV a manufacturer/reseller or a service company? 2. Explain the term cost of goods sold in your own words. Why is this item significant? 3. Does the company have employees? 4. Does the company own some type of property? Can we tell from looking at the income statement alone or do we need to look at the balance sheet too? 5. Are earnings per share important information for VWV Company? 6. How do the dividends affect the income statement? 7. How do we know that VWV Company is using the accrual basis of accounting? Hint: Do not forget to look at the balance sheet from the prior module. 8. Why is the company using the accrual basis of accounting rather the cash basis? 9. Comment on operating income versus net income. SLP Assignment Expectations Use Word and respond in a question and answer format. There is no need to use Excel for this particular SLP.