Chapter 12: SB Accounting Critical Thinking Learning Objective 3 1. With Gary's help, Claude has purchase, installed and setup his new accounting software program. In fact, he has just printed his first income statement and balance sheet, reproduced below. Basic Industries Income Statement for year ending 12/31/20XX 356,428 105,200 251,228 Sales revenue Less cost of goods sold Gross margin Less operating expenses Marketing Sales and administrative Depreciation Total operating expenses Operating income Less interest expense Income before taxes Income tax expense Net income 30,000 30,000 10,000 7 70,000 181.228 6,000 175,228 40,000 135,228 Basic Industries Balance Sheet for 12/31/20XX Assets Current Assets Cash Accounts receivable Inventory Total current assets Fixed assets Property, plant and equipment Accumulated depreciation Net fixed assets Total assets $ 52,400.00 $ 11,300.00 $ 15,600.00 $ 79,300.00 $ 80,000.00 $ (10,000.00) $ 70,000.00 $149,300.00 Liabilities and Owner's Equity Current liabilities Accounts payable Note payable to bank Deposits from customers Total current liabilities Long term mortgage Total liabilities Owner's Equity Retained earnings Total Owners' Equity Total liability and equities $ 5,300.00 $ 2,700.00 $ 6,000.00 $ 14,000.00 $ 50,000.00 $ 64,000.00 $ 85,300.00 $ 85,300.00 $149,300.00 To see if he really understands what's going on, Gary asked Claude the following questions. Claude answered most of them correctly, can you? a. How much revenue did the business produce? b. What costs did the business have for financing? c. What can you turn into cash in one year? d. What did it cost to make your product? e. What is the value of everything the company owns? f How much profit did the company make? g. How much is the business worth to Claude? h. How much does the business need for its continuing operation? i. What debts will take longer than a year to pay? j. Can this business be considered liquid? I na nited States) Learning Objective 4 2. Now that Claude had mastered the basics, he was full of questions for Gray. "I keep hearing about different kind sorts accounting - financial accounting, managerial accounting? Are they the same thing? If not, when do I use which one?" What will Gary tell him