Morrisey & Brown, Limited, is the sole distributor of a product with growing sales. Its income statements for the three most recen months follow: Sales in units Sales Cost of goods sold Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 July 8,750 $ 962,500 577,500 385,000 Gross margin Selling and administrative expenses: Advertising expense Shipping expense Salaries and commissions Insurance expense Depreciation expense Total selling and administrative expenses Net operating income 31,000 120,000 160,000 6,950 16,700 334,650 $ 50,350 August 9,250 $ 1,017,500 610,500 407,000 31,000 125,800 167,900 6,950 16,700 348,350 $ 58,650 September 9,750 $ 1,072,500 643,500 429,000 Complete this question by entering your answers in the tabs below. 31,000 131,600 175,800 6,950 16,700 362,050 $ 66,950 Required: 1. By analyzing data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed por of each mixed expense in the form Y = a +bX. 3. Redo the company's income statement at the 9,750-unit level of activity using the contribution format.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
A-7
Step by step
Solved in 5 steps
