VERMONT COMMUNICATIONS Income Statement Year Ended July 31, 2018 Net Sales Revenue $ 26,500 Cost of Goods Sold 12,200 Gross Profit 14,300 Operating Expenses: Selling Expenses $ 690 Administrative Expenses 1,550 Total Operating Expenses 2,240 Operating Income 12,060 Other Income and (Expenses): Interest Expense Total Other Income and (Expenses) Net Income before Income Tax Expense Income Tax Expense 2,410 Net Income
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Computing times-interest-earned ratio
The income statement for Vermont Communications follows. Assume Vermont Communications signed a 3-month, 3%, $6,000 note on June 1, 2018, and that this was the only note payable for the company.
Requirements
- Fill in the missing information for Vermont’s year ended July 31, 2018, income statement. Round to the nearest dollar.
- Compute the times-interest-earned ratio for the company. Round to two decimals.
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