Chapter 5, Problem 5.1FSC

1.

To determine

Income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

Balance sheet: This is a financial statement that shows the assets, liabilities, and stockholders’ equity of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as the Statement of Financial Position.

To Describe: The value of the T Company’s inventory at January 30, 2016, and January 31, 2015.

2.

To determine

To Describe: The items that are consists in Company T’s inventories.

3.

To determine

To Describe: The amount of cost of goods sold of Company T at January 30, 2016, and January 31, 2015.

4.

To determine

To Mention: The format that Company T use for preparing income statement.

5.

To determine

Gross profit percentage is the financial ratio that shows the relationship between the gross profit and net sales. Gross profit is the difference between the total revenues and cost of goods sold. It is calculated by using the following formula:

$\text{Gross profit percentage}=\frac{\text{Gross profit}}{\text{Net sales}}\times 100$

To Calculate: The gross profit percentage of Company T for January 30, 2016, and January 31, 2015.