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Superior Manufacturing Company: Income Statement

Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to part a. Then paste the Excel data into a Word document on which you can also write the answer to part b.

income_statement.xlsx

Administrative Expenses........................................................................................

$ 70,000

Finished Goods Inventory January 1, 2011..............................................................

120,000

Cost of Goods Manufactured during the year.........................................................

200,000

Finished Goods Inventory December 31, 2011........................................................

60,000

Selling Expenses....................................................................................................

40,000

Sales......................................................................................................................

680,000

Required:

Using the information for Superior Manufacturing Company, prepare the income statement for the year ended December 31, 2011. (Assume a 30 % income tax.)
Create a report between 200 and 300 words in length for leadership. The topic is the state of this company. Make some suggestions if there are areas you feel need to be further investigated.

Solution Preview

The first things to consider are the entries for finished goods inventory. These are actually assets, belonging on the Balance Sheet, not the Income Statement. So for purposes of this response, we will not account for these within the Income Statement (possibly placed here to determine if you are able to distinguish the difference?).

So, in order of entry, the following applies:

Sales ----------------------------------------------- $680,000

Less: Cost of Goods sold ------------------------ $200,000

Equals Gross Profit ------------------------------- $480,000

Less: Admin Expenses -------------------------- $ 70,000
Less: Selling Expenses -------------------------- $ 40,000

Equals Earnings Before Interest & Taxes ...

Solution Summary

This analysis is an interpretation and identification of items logically intended to reside within the income statement. It follows the facts presented in the case to the interpretation of the data based upon trends, industry averages, and financial impacts.

$2.19