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E 6-22A
Crane Company
Income Statement
Year Ended December 31, 20X6
(Millions)
Net sales
$ 105
Cost of goods sold
Beginning inventory
$ 19
Net purchases
65
6-1
2014 Pearson Education
Goods available
Ending inventory
Cost of goods sold
Gross profit
Operating and other expenses
Net income (Net loss)
6-2
2014 Pearson Education
84
(18)
66
39
41
$(2)
(20-30 min.)
P 6-60A
Req. 1
Inventory.
Accounts Payable
8,107,000
Accounts Payable.
Cash.
7,707,000
Cash.
Accounts Receivable...
Sales Revenue..
4,900,000
9,308,000
8,107,000
7,707,000
14,208,000
Operating Expenses.
Cash ($3,750,000 .70)...
Accrued Liabilities ($3,750,000 .30).
3,750,000
2,625,000
1,125,000
6-4
2014 Pearson Education
(continued)
P 6-60A
Req. 2
Inventory
Beg. bal.
Purchases
End. bal.
1,050,000
8,107,000 COGS
892,680
8,264,320
Req. 3
Nice Buy Store, Dallas
Income Statement
Year Ended February 28, 20X6
Sales revenue $ 14,208,000
Cost of goods sold..
8,264,320
Gross profit
5,943,680
Operating expenses.
3,750,000
Income before tax.
2,193,680
Income tax expense (30%).
658,104
Net income. $ 1,535,576
6-5
2014 Pearson Education
(30-40 min.)
P 6-63A
LIFO
$132,447
74,360
$ 58,087
= $73,888
FIFO COGS
= $73,359
LIFO COGS
= $74,360
Req. 2
6-6
2014 Pearson Education
6-7
2014 Pearson Education
(15-30 min.)
P 6-64A
75,000
75,000
$145,000*
$845,000
6-9
2014 Pearson Education
(15-20 min.)
P 6-68A
6-10
2014 Pearson Education
(continued)
P 6-68A
Req. 2
The corrections did not change total net income over the three-year
period. But the corrections drastically altered the trend of net income
from an increasing pattern to a decreasing pattern.
Req. 3
The shareholders will not be happy with a declining trend of net
income because the company is losing ground with its profits.
6-11
2014 Pearson Education