Lauren DiLorenzo organized Viva Lingerie Company on January 1, 2010, to manufacture undergarments with a French flair. At the end of 2010, the following income statement was prepared:
VIVA LINGERIE COMPANY
Income Statement
For the Year Ended December 31, 2010
Revenues
Sales revenue (cash) ....................................... $276,000
Sales revenue (credit) ....................................... 192,000
Total revenues ................................................ 468,000
Expenses
Cost of goods sold ........................................... 236,000
Wages expense ................................................ 148,000
Advertising expense ............................................. 4,000
Interest expense .................................................... 5,000
Utilities expense .................................................. 12,000
Other expenses .................................................... 15,000
Total expenses ................................................... 420,000
Net income ....................................................... $ 48,000
Required:
1. What was the average amount of monthly revenue?
2. What was the average amount of monthly selling expense?
3. Explain why cost of goods sold is reported as an expense.
4. Explain why utilities expense is reported as an expense.
5. Can you determine how much cash the company had on December 31, 2010? Answer yes or no, and explain your reasoning.