Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed. To ascertain: The difference between the income statement presented in exhibit 3.1 and the one given in the question.

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Answer 1

Question

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

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Which of the following statements are TRUE? a. The reason for including a treatment of depreciation in this book is to allow you to develop a reasonably accurate report to the owners of a business regarding its value at any given point in time. b. Depreciation spreads investment costs over the useful life of equipment purchased. c. Depreciation allowances can be treated as expenses because they are cash flows. d. Depreciation affects income taxes, which are cash flows.

Answer 2

Question

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

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Answer 3

Question

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

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Answer 4

Question

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

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Answer 5

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

Answer 6

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

Answer 7

Chapter 3, Problem 3.2P

(a)

To determine

Introduction:Income statement is a statement which presents the revenues and expenses of the company in a structured way to reflect the net income/loss earned by the company. Primarily, there are two methods of presenting the income statement, i.e., condensed and detailed.

To ascertain:The difference between the income statement presented in exhibit 3.1 and the one given in the question.

Answer 8

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

Answer 9

(b)

To determine

Introduction: Depreciation is a method of allocation of cost of an asset over the period of its useful life. There are various methods of depreciation primarily being straight line method and written down value method. Depreciation helps in increasing the profit margin of the company by increasing the cost which leads to decrease in tax liability.

To find: Whether B Co. spends $367,000 on new fixed assets during 2015 and the economic rationale behind it if it not so.

Answer 10

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

Answer 11

(c)

To determine

Introduction:Total profit margin is calculated by dividingthe net income of the company with the total revenue. A lower profit margin indicates higher risk i.e. decline in sales will erase profits and lead to net loss. The net profit margin reflectsthe efficiency in production, effective company's pricing policies and robust cost structure.

To compute: The total profit margin of B Co. and interpretation of the same.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 3 - Prob. 1.1STQ Ch. 3 - Prob. 1.2STQ Ch. 3 - Prob. 2.1STQ Ch. 3 - Prob. 2.2STQ Ch. 3 - Prob. 2.3STQ Ch. 3 - Prob. 3.1STQ Ch. 3 - Prob. 3.2STQ Ch. 3 - Prob. 3.3STQ Ch. 3 - Prob. 3.4STQ Ch. 3 - Prob. 3.5STQ

Solution Summary: The author explains the difference between the income statement presented in exhibit 3.1 and the one given in the question.

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