Dear Taku,

Thank you for your seventh message. My comments follow.

Sincerely,

Prof. Sue Stiner

> Takumi Kimoto wrote:

> Dear Dr. stiner,

> Thank you for your reply.

> Homework.

1. What is the format for an American Income Statement?

The Income Statement is the statement that shows:

> Revenue

> Less: Expenses

> Equals: Net Income or Loss

> In the U.S., we show losses with brackets < > or parentheses ( ), so

> Revenue

> Less: Expenses

> Equals: Net Income (Loss)

> Expenses are divided into two groups: cost of goods sold and operating

expenses.

correct.

The best answer is: Revenue Less Cost of Goods Sold = Gross Margin less

Operating Expenses = Net Income (Loss).

2. What is the amount of gross margin if Beach Toys, Inc used LIFO, not

FIFO, to value inventory?

> It's 15,000.

correct. Cost of Goods Sold is $15,000 under LIFO. So gross margin is

$15,000.

3.Is the purchase price of inventory rising or falling?

> I think it's falling.

The purchase price of inventory is rising (increasing).

The first purchase was for $100 per unit. The second purchase was for

$120 per unit. The second purchase costs more per unit than the first

purchase. The third purchase was for $150 per unit. The third purchase

costs more than the second purchase.

4.Which inventory method (LIFO or FIFO) is better for Beach Toys, Inc to

use?

> Better" means "results in lower income tax.

> It's LIFO.

correct

5.Vocabulary - Income Statement (Part 1)

Thank you for the vocabulary words

> I'm looking forword to hearing from you.

> Have a nice day.

> Sincerely, Taku

This week we will finish the income statement. The next lesson is at:

http://www72.homepage.villanova.edu/susan.stiner/cgu/income201.htm

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