E-8 Hope Company has been suffering losses since its incorporation. After 3 years of consecutive losses,...
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E-8 Hope Company has been suffering losses since its incorporation. After 3 years of consecutive losses, the company president was hopeful to have a profit in 2011. But when he had found the Income Statement for the year ended 2011, he became very disappointed and thinking of closing the operations. Before doing so he seeks your recommendation as the Income Statement for the year ended 2011 were prepared by a new accountant in absence of the responsible accountant for the purpose who has been sick for a month. To facilitate your recommendation the following data are available: Hope Company Income Statement For the year ended 31st December, 2011 Descriptions Sales TK TK 6,00,000 Less: Operating Expenses xii) xiii) хiv) XV) хvi) xvii) хvi) хіх) Xx) xxi) xxii) Total Selling and Administrative Salary Rent on Facilities 35,000 40,000 1,90,000 8,000 10,000 50,000 1,08,000 90,000 12,000 7,000 80,000 Purchase Insurance Depreciation- Sales Equipment Utilities Indirect Labour Direct Labour Depreciation-Factory Equipment Maintenance-Factory Advertising 6,30,000 ©Mohammad Rokibul Kabir Cell: 01971555211/01738143989; email: Rokibul.k@eastdelta.edu.bd; Web: www.rakibais.weebly.com Associate Professor, SoB, EDU Management Accounting Prepared for the Students of EDU Net Operating Loss 30,000 Additional Information: i) 20% of the rent on facilities are applied administrative activities ii) Inventory balances follow Beginning Ending Raw Materials Tk.17,000 Tk.42,000 85,000 60,000 Work in process 70,000 Finished Goods 20,000 iii) 80% of the utilities and 90% of insurance are applied to the factory overhead Required: a) Prepare a Cost of Goods Sold Statement b) Prepare an Income Statement c) Recommend whether the company should continue its operation and explain the reasons for the differences in profit between two Income Statements E-8 Hope Company has been suffering losses since its incorporation. After 3 years of consecutive losses, the company president was hopeful to have a profit in 2011. But when he had found the Income Statement for the year ended 2011, he became very disappointed and thinking of closing the operations. Before doing so he seeks your recommendation as the Income Statement for the year ended 2011 were prepared by a new accountant in absence of the responsible accountant for the purpose who has been sick for a month. To facilitate your recommendation the following data are available: Hope Company Income Statement For the year ended 31st December, 2011 Descriptions Sales TK TK 6,00,000 Less: Operating Expenses xii) xiii) хiv) XV) хvi) xvii) хvi) хіх) Xx) xxi) xxii) Total Selling and Administrative Salary Rent on Facilities 35,000 40,000 1,90,000 8,000 10,000 50,000 1,08,000 90,000 12,000 7,000 80,000 Purchase Insurance Depreciation- Sales Equipment Utilities Indirect Labour Direct Labour Depreciation-Factory Equipment Maintenance-Factory Advertising 6,30,000 ©Mohammad Rokibul Kabir Cell: 01971555211/01738143989; email: Rokibul.k@eastdelta.edu.bd; Web: www.rakibais.weebly.com Associate Professor, SoB, EDU Management Accounting Prepared for the Students of EDU Net Operating Loss 30,000 Additional Information: i) 20% of the rent on facilities are applied administrative activities ii) Inventory balances follow Beginning Ending Raw Materials Tk.17,000 Tk.42,000 85,000 60,000 Work in process 70,000 Finished Goods 20,000 iii) 80% of the utilities and 90% of insurance are applied to the factory overhead Required: a) Prepare a Cost of Goods Sold Statement b) Prepare an Income Statement c) Recommend whether the company should continue its operation and explain the reasons for the differences in profit between two Income Statements
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