We reviewed the balance sheet for VWV in the prior module. This time we are examining the income statement for the same entity.
For the Period Ending December 31, 20XX
Cost of goods sold
Lease for office
Advertising and promotion
Total operating expenses
Net interest expense
Use the above income statement to answer the questions below.
Is VWV a manufacturer/reseller or a service company?
Explain the term cost of goods sold in your own words. Why is this item significant?
Does the company have employees?
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?
Are earnings per share important information for VWV Company?
How is depreciation computed and what is the purpose of including depreciation expense?
How do the dividends affect the income statement?
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.
Why is the company using the accrual basis of accounting rather than the cash basis?
Comment on operating income versus net income.
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