< The eighth message >
Ｄｅａｒ Ｄｒ． Ｍ． Ｓｕｓａｎ Ｓｔｉｎｅｒ,
Thank you for your message. I have financial statements and language reading classes on Friday.
One starts at twelve fifty and the other at two thirty p.m.
Both of the classes are taught by Prof. Shiina.
We had to leave school fir our homes before one o'clock,
because the typhoon was getting more dangerous.
The typhoon died down about four hours later. Don't worry.
Homework:
1. Income statement indicates the net income or earnings of a firm for a period of time. Net income is the difference between revenues and expenses.
2.
Vocabulary-Lesson 4
( English ) ------------------------- ( Japanese )
cost of goods sold ------------------- uriagegenka
first-in, first out ------------------- sakiire-sakidasi-hou
gross margin -----------------------uriagesourieki
inventory -------------------------- tanaorosi
last-in, first-out -------------------- atoire-sakidasi-hou
purchase --------------------------- siire
revenue ---------------------------- shuueki
sale ------------------------------- uriagedaka
Sincerely,
Yuki
< Reply to my eighth message from Dr. Susan Stiner >
Dear Yuki,
Thank you so much for your eighth message. My comments follow.
Sincerely,
Prof. S. Stiner
Yuki, once again it is very ditticult to read your message.
Last week was fine. This week is not. Some nonsense
symbols are inserted every time you put a space between the words. Can you
think of what was different in these two weeks? What
key did you use to put an empty space between each word? Did you use a different
computer?
What I think you sent in the 8th message has > in front of each line.
My comments are written between the lines.
The English in #1 is correct. Congratulation!
Yuki, I don't know if (1) you didn't know the answer, or (2) you sent
something which my computer could not read.
Vocabulary-Lesson 4
Yuki, I omitted this. I got all the words you sent. Thank you.
Yuki, my computer is giving me trouble. I will send you another
message with
(1)the answer to last week's questions and
(2)the next lesson.
Prof. M. Susan Stiner
|
< Reply to 8th message-part 2 >
Dear Yuki,
This is the second of two messages to you this week.
this message has the answers to last week's questions and the new
lesson.
This is what I expected you to write in
answer to last week's questions.
1. What is the format of the American
Income Statement?
In a simple American Income Statement, list
Sales (Revenue) first. Then subtract Cost of
Goods Sold. The result is called Gross
Margin. Subtract Operating Expenses from
Gross Margin. The result is called Net
Income.
2. What would the Gross Margin be if
Delaware Parts used LIFO?
The gross margin would be:
Revenues $30,000
less: Cost of Goods Sold
Beginning Inventory $ 0
plus: Purchases 37,000
---------
Available For Sale 37,000
less: Ending Inventory 22,000
---------
Cost of Goods Sold 15,000
---------
Gross Margin $15,000
======
Explanation:
(I did not expect you to write this. I did
expect you to understand this.)
Delaware Parts bought 300 units of
inventory (purchases). They sold 100 units
(revenue). They have 200 units left (ending
inventory). They had no units on hand at the
beginning of the month (beginning
inventory).
Under LIFO, the most recent purchases are
the first units sold. The oldest purchases
remain in ending inventory. Delaware Parts
has 200 units of ending inventory. Look at
the cost of the oldest purchases to find the
cost of the ending inventory. The first and
second purchases were for 200 units. That is
the amount of the ending inventory. So the
cost of the first two purchases is the cost of
the ending inventory under LIFO. The cost
of the first two purchases is:
#1 (100 units x $100) $10,000
#2 (100 units x $120) 12,000
---------
Total $22,000
The Cost of Goods Sold is usually the largest
expense a company has. The method used to
value inventory (FIFO or LIFO) makes a big
difference in the amount of the Cost of
Goods Sold. If the Cost of Goods Sold is
large, Net Income is smaller. If the Cost of
Goods Sold is small, Net Income is larger.
Companies can manipulate (change) earnings
simply by carefully selecting the method of
inventory valuation.
This is the new lesson.
____________________________________
INCOME STATEMENT
Part 2 - Determining Net Income
Expenses are outflows of assets used to
get revenues.
Delaware Parts has the following
additional transactions during January:
1. Received a bill from the telephone
company for $150.
2. An employee is paid $800 twice a
month. $800 was paid on January 16, and
$800 will be paid on February 1.
3. The life of the building is 40 years. (The
building purchase for $50,000 is shown in
the lesson sent to you on May 25, 1997.)
When these entries are recorded in a journal,
the entries are:
debit
credit
_______ _____
1. Telephone expense $ 150
Utilities payable $ 150
2. Salary expense $ 800
Cash $ 800
(This accounts for the Jan 16th payment
of salary.)
Salary expense $ 800
Salary payable $ 800
(This accounts for the Feb 1 payment of
salary.)
3. Depreciation expense $ 104
Accumulated depreciation $ 104
Calculation:
$50,000/40 years = $1,250 per year.
$1,250/12 months = $104 per month.
The income statement at the end of January
is now:
Delaware Parts, Inc.
Income Statement
January 31, 1996
Revenues $ 30,000
Cost of Goods Sold:
Beginning Inventory $ - 0 -
Purchases 37,000
_____
Available for sale 37,000
less: Ending inventory 27,000
_____
Cost of goods sold 10,000
_____
Gross margin 20,000
Operating expenses:
Depreciation 104
Salary 1,600
Telephone 150
_____
total expenses 1,854
_____
Net Income $ 18,146
=====
In American accounting, we draw double
lines (========) at the end of a
financial statement.
Vocabulary - Lesson 5
English Japanese
______ _______
accumulated depreciation
depreciation expense
Prof. M. Susan Stiner