Assignment 1 Accounting

AAST - Accounting & Financial Reporting
Submitted to Prof. Mahmoud Soliman

Assignment*1
Name: Kareem Sherif Albarawi
Registration Number: 22227727
E1-6: Assume that you are the owner of Campus connection, which specializes in
items that interest students. At the end of January 2014, you find (for January
only) this information:
a- Sales per cash register tapes of $150000 plus one sale on credit (a special
situation) of $2500.
b- With the help of a friend (who majored in accounting) you determine that all
of the goods sold during January cost $70000 to purchase.
c- During the month, according to the checkbook, you paid $37000 for salaries,
rent, supplies, advertising and other expenses; however, you have not yet paid
the $900 monthly utilities for January on the store and fixtures.
Required: On the basis of the data given (disregard income taxes), what was the
amount of net income for January? show computations. (hint: a convenient form
to use has the following major side captions: Revenue from sales, expanses and
the difference -- net income):
Solution: Income Statement for the month of January 2014:
- Revenue:
 Sales cash $150,000
 Sales on credit $2,500
 Total sales $152,500
- Expenses:
 Cost of goods sold $70,000
 (salaries, rent, supplies, advertising other expense)
$37,000
 Utilities $900
 Total $107,900
Net income =Revenue –Expense
= $152,500 - $107,900 = $44,600
E1-7: Walgreen Co. is one of the nation’s leading drugstore chains. Its recent
income statement contained the following items (in millions). Prepare an income
statement for the year ended August 31, 2011.
(Hint: First order the items as they would appear on the income statement and
then confirm the values of the subtotals and totals)
- Cost of sales: $51692.
- Provision for income taxes: 1580.
- Interest expense: 71.
- Net earnings: 2714.
- Net sales: 72184.
- Pretax income: 4294.
- Selling, general and administration expense: 16561.
- Other income: 434.
- Total expenses: 68324.
- Total Revenues / income: 72618.
SOLUTION
Revenues:
Net sales $72,184
Other income $434
Total revenues $72,618
Expenses:
Cost of sales $51,692
Selling, general and administration expense $16,561
Interest Expense $71
Total expenses $68,324
Pretax income $4,294
Income tax expense $1,580
Net Income $2,714
E1-8: Neighborhood Realty, Incorporated, has been operating for three years and
is owned by three investors. S. Bhojari owns 60 percent of the total outstanding
stock of 9000 shares and is the managing executive in charge. On December 31,
2015, the following financial items for the entire year were determined:
Commissions earned and collected in cash, $150,900, plus $16,800 uncollected;
rental services fees earned and collected, $20,000; salaries expense paid, $62,740;
commissions expense paid, $35,330; payroll taxes paid, $2,500; rent paid, $2,475
(not including December rent yet to be paid); utilities expense paid, $1,600;
promotion and advertising paid, $7,750; income taxes paid, $24,400; and
miscellaneous expense paid, $500, There were no other unpaid expense at
December 31. Also during the year, the company paid the owners "out-of-profit"
cash dividends amounting to $12,000. Complete the following income statement:
 Revenues
- Commissions earned
- Rental service fees
- Total revenues
 Expenses
- Salaries expense
- Commission expense
- Payroll tax expense
- Rent expense
- Utilities expense
- Promotion and advertising expense
- Miscellaneous expense
- Total expenses (excluding income taxes)
 Pretax income
- Income tax expense
 Net income $50,180
SOLUTION
Revenues:
Commissions earned ($150,900+$16,800) = $167,700
Rental service fees $20,000
Total revenues $187,700
Expenses:
Salaries expense $62,740
Commission expense $35,330
Payroll tax expense $2,500
Rent expense ($2,475/11=$225) ($2475+$225) = $2,700
Utilities expense $1,600
Promotion and advertising expense $7,750
Miscellaneous expenses $500
Total expenses $113,120
Income tax expense $24,400
Net Income $50,180
P5-5 Page 264
Aeropostale, Inc., is a mall-based specialty retailer of casual apparel and
accessories. The company concept is to provide the customer with a focused
selection of high-quality, active-oriented fashions at compelling values. The items
reported on its income statement for a recent year (ended March 31) are
presented here (dollars in thousands) in alphabetical order:
 Cost of goods sold $1,733,916

 Invest expense 417
 Net revenue 2,342,260
 Other selling, general, and administrative expenses 494,829
 Provision for income taxes 43,583
 Weighted average shares outstanding 81,208
Required: Prepare a multiple-step consolidated income statement (showing gross
profit, operating income, and income before taxes). Include a presentation of
basic earnings per share. What is the gross profit percentage? Explain its meaning.
SOLUTION
Net Revenue $2,342,260
Cost of goods sold $1,733,916
Gross Profit $608,344
Operating Expenses
Other selling, general, and administrative
expenses $494,829
Operating income $113,515
Non-Operating Expenses
Interest expense $417
Income taxes expense $43,583
Net Income $69,515
*) Gross profit percentage = (gross profit /net revenue) *100 =
($608344÷$2342260) *100 = 26%
*) It means that each $1 of sales generated gross profit of 26 Cent.

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AAST - Accounting & Financial Reporting

Submitted to Prof. Mahmoud Soliman

 Cost of goods sold $1,733,916

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