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    Swift Company

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    Pradnil Donde
    - Swift Company organized in March 2009 and expected to earn a profit by August after initial start-up losses, but reported another loss for August. - The August income statement prepared by an assistant controller showed $450,000 in sales and $462,000 in operating expenses, resulting in a $12,000 net operating loss. - The company president stated they should have been profitable within six months but the continued losses in July and August mean they need to consider selling the company's assets soon before they lose all value.

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    Swift Company

    Uploaded by

    Pradnil Donde
    117 views2 pages
    - Swift Company organized in March 2009 and expected to earn a profit by August after initial start-up losses, but reported another loss for August. - The August income statement prepared by an assistant controller showed $450,000 in sales and $462,000 in operating expenses, resulting in a $12,000 net operating loss. - The company president stated they should have been profitable within six months but the continued losses in July and August mean they need to consider selling the company's assets soon before they lose all value.

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    - Swift Company organized in March 2009 and expected to earn a profit by August after initial start-up losses, but reported another loss for August. - The August income statement prepared by an assistant controller showed $450,000 in sales and $462,000 in operating expenses, resulting in a $12,000 net operating loss. - The company president stated they should have been profitable within six months but the continued losses in July and August mean they need to consider selling the company's assets soon before they lose all value.

    Copyright:

    © All Rights Reserved
    Download as RTF, PDF, TXT or read online from Scribd
    Download as rtf, pdf, or txt
    117 views2 pages

    Swift Company

    Uploaded by

    Pradnil Donde
    - Swift Company organized in March 2009 and expected to earn a profit by August after initial start-up losses, but reported another loss for August. - The August income statement prepared by an assistant controller showed $450,000 in sales and $462,000 in operating expenses, resulting in a $12,000 net operating loss. - The company president stated they should have been profitable within six months but the continued losses in July and August mean they need to consider selling the company's assets soon before they lose all value.

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    Swift company was organized on Mach 01, 2009.

    After five months of start-up losses management had


    expected to earn a profit during August. Management was disappointed, however, when the income
    statement for August also showed a loss. August’s income instatement follows:

    SWIFT Company                                                                                                                                 
    Income Statement For the Month Ended August 31, 2009

    Sales   450000
    Less Operating Expenses    
    Indirect Labour 12,000  
    Utilities 15,000  
    Direct Labour 70,000  
    Depreciation, Factory Equipments 21,000  
    Raw Material Purchased 165,000  
    Depreciation, Sales Vehicles 18,000  
    Insurance 4,000  
    Rent 50,000  
    Selling and Administrative Salaries 32,000  
    Advertising 75,000 462,000
    Net Operating Losses   (12,000)

    After seeing the loss of $ 12000 for august, Swift’s president stated, “I was sure we would be profitable
    with in six months, but our six months are up and this loss for August is even worse than July’s. I think it
    is time to starts looking someone to buy out the company’s assets – if we don’t, with in a few months
    there will be no asset to sell. By the way, I don’t see any reason to look for new controller. We will just
    limp along with Sam for the time being.”

    The company’s controller resigned a month ago. Sam, an assistant in the controller’s office, prepared the
    income statement above. Sam has a little experience in manufacturing operations. Additional
    information about the company is as follows:

    a) Some 60% of utilities cost and 75% of insurance apply to factory operations. The remaining
    amounts apply to selling and administrative activities.
    b) Inventory balances at the beginning and end of August were:

      1-Aug 31-Aug
    Raw Material 8,000 13,000
    WIP 16,000 21,000
    Finished Goods 40,000 60,000

    c) Only 80% of rent on facilities applies to factory operations. Remaining applies to selling and
    administrative activities.
    The president has asked to check over the income statement and make a recommendation as to
    whether the company should look for a buyer for its assets.

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