Solution-Explain accounting treatment of sales returns and

Explain accounting treatment of sales returns and allowances

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Reference no: EM131819972

Assignment

QUESTION 1

Sophia Limited (Ltd)

Statement of Comprehensive Income (Income Statement) for the year ended 30 June 2016 (Extract)

	R
Sales	10 800 000
Cost of sales	(4 320 000)
Gross profit	6 480 000
Operating expenses	(1 800 000)
Profit from operations	4 680 000
Interest income	100 000
Interest expense	?
Profit before tax	4 320 000
Income tax (@ 28%)	(1 209 600)
Net profit	3 110 400

Required:

1.1 Which method of depreciation will result in lower net profit in the early years of the life of the asset? Briefly explain?

1.2 Comment on the significance of the operating profit to investors.

1.3 Provide reasons why the shareholders and managers would be interested in the statement of comprehensive income (income statement).

1.4 Calculate the interest expense for the year ended 30 June 2016.

1.5 Explain the accounting treatment of sales returns and allowances.

1.6 Interest has been calculated at 8% per year on the amount invested. Assume that there was no change in investments during the year, determine the value of the investment.

Reference no: EM131819972

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Explain accounting treatment of sales returns and allowances

Reference no: EM131819972

Reference no: EM131819972

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