FINANCIAL ACCOUNTING VALIX VOL.

1
Chapter 2 - Financial Statements 2009 Ed
FUNCTIONAL METHOD

Karla Company
Income Statement
Year ended DECEMBER 31, xxx

Net sales revenue 7,700,000

Cost of sales (5,000,000)

Gross income 2,700,000

Other income 400,000

Total income 3,100,000

Expenses
Distribution costs 950,000
Administrative expenses 800,000
Other expnses 100,000 1,850,000

Income before tac 1,250,000

Income tax (250,000)

Net income 1,000,000

Note 1 - Net sales revenue

Gross sales 7,850,000 175,000
SRA (140,000) 650,000
Sales discounts (10,000) 125,000
Net sales revenue 7,700,000 950,000

Note 2 - Cost of sales

Inventory, Jan 1 1,000,000 500,000
Purchases 5,250,000 300,000
Freight in 500,000 Total 800,000
Purch ret & all (150,000)
Purch idscounts (100,000)
Net purchases 5,500,000 50,000
Goods avail for sale 6,500,000 50,000
Inventory, Dec 31 (1,500,000) Total 100,000
Cost of sales 5,000,000

Note 3 - Other income

Rental income 250,000
Dividend revenue 150,000
Total 400,000
FINANCIAL ACCOUNTING VALIX VOL. 1
Chapter 2 - Financial Statements 2009 Ed

NATURAL METHOD
Karla Company
Income Statement
Year ended DECEMBER 31, xxx

Net sales revenue 7,700,000

Other income 400,000

Total 8,100,000
Expenses
Increase in inventory (500,000)
Net purchases 5,500,000
Freight - out 175,000
Sal;esmens' commissions 650,000
Deprciation 425,000
Officer's salarie4s 500,000
Other expenses 100,000 6,850,000

Income before tac 1,250,000

Income tax (250,000)

Net income 1,000,000

Note 1 - Net sales revenue

Gross sales 7,850,000 5,250,000
Sales returns & allowances (140,000) 500,000
Sales discounts (10,000) (150,000)
Net sales revenue 7,700,000 (100,000)
Net purchases 5,500,000
Note 2 - Other income
Rental income 250,000
Dividend revenue 150,000
400,000 125,000
300,000
Note 3 - Increase in inventory Total 425,000
Inventory,, December 31 1,500,000
Inventory,, January1 1,000,000
Increase in inventory 500,000 50,000
50,000
Total 100,000
FINANCIAL ACCOUNTING VALIX VOL. 1
Chapter 2 - Financial Statements 2009 Ed

XXX COMPANY
Statement of Cost of Goods Manufactured & Sold
Year ended DECEMBER 31, xxx

Raw materials, January 1 200,000

Purchases 3,000,000
Raw materials available for use 3,200,000
Less: Raw materials, December 31 280,000
Raw materials used 2,920,000
Direct labor 950,000
Factory overhead
Indirect labor 250,000
Superintendence 210,000
Light, heat & power 320,000
Rent - factory building 120,000
Repairs &maint3enance4 - machinery 50,000
Factory supplis usede 110,000
Depreciation - machinery 60,000 1,120,000
Total manufacturing cost 4,990,000
Goods in process , January 1 240,000
Total Cost of goods in process 5,230,000
Less: Goods in process, December 31 170,000
COST OF GOODS MANUFACTURED 5,060,000
Add: Finished Goods, Beg 360,000
Total Goods Available for Sale 5,420,000
Less: Finished Goods, End 360,000
COST OF GOODS SOLD 5,060,000

Sales 7,000,000.00
COST OF GOODS SOLD 5,060,000.00

Gross profit 1,940,000.00

Expenses 1,500,000.00

Net income 440,000.00

30% Corporate tax 132,000.00

Net income after tax 308,000.00