Based on all the receipts of cash transactions, the accountant was able to publish this income statement for the quarter ending September 30, 2015. He also provided you with some information to allow you to prepare the adjusting entries.
For each of the below Information, Indicate whether an adjustment is needed and if yes, it is a reclassification or has an impact on the Net Income. Explain each of your decision.
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Income Statement
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Sales
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1,800,000
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Cost of Goods sold
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750,000
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Gross Profit
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1,050,000
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Operating expenses
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830,000
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EBIT
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220,000
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Interest
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200,000
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Income before tax
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20,000
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Income tax
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-
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Net Income
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20,000
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1. Sales include:
a. $ 100,000 paid by customer A for products shipped and billed in January this year.
b. $ 50,000 paid by customer B for products ordered to be shipped in October
c. $ 20,000 received for the sale of an old equipment which has no value in the bode.
2. Cost of pooch sold Includes
a. $ 80,000 paid to a supplier for products delivered and billed in August 2015. These products have not been sold as of the end of the quarter.
b. $ 20,000 paid for freight out to customers, related to August sales.
3. Operating Expenses include the following;
a. Rent paid to the landlord $ 120,000 for the period October 2015 to September 2018
b. $ 24,000 paid for an advertising campaign which consists of having an advertising page on a newspaper, once a month, for the next 12 months, starting from August 2015
c. Salary of 4 engineers ($ 40,000) who worked for the development of a new technology
4. Interest expenses of $ 200,000 are paid for the whole year 2015
5. The Corporate Income tax rate is 30%
Prepare the revised Income statement using the above format. The Company has 10,000 outstanding shares. Calculate the EPS.