Running head: xyz Company income statement 2013 1

XYZ Company Income Statement 2013

Melissa Khang

Bellevue University

Author Note

Using the income statement that was assigned in this assignment, assumptions will be

made in order to make the next year a more promising year with budgeted goals from the CEO.

xyz Company income statement 2013 2

Abstract

Using assumptions given from the CEO, these assumptions will be adapted into the current 2012

Income Statement in order to see the next year’s income statement with the changes and

occurrences that will change the trends. With the information given, questions about the changes

will be answered by comparing the differences and similarities in order to gain a better

perspective on how the company is utilizing their disbursements.

Keywords: accounting, income statement, reporting form, income, liabilities, equity.

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XYZ Company Income Statement 2013

Financial statements are critical, regulated, and mandatory for a business. Because of

laws and regulations, the reports are required to be done for the reporting term. The Income

Statement is the second reporting form that should be done in order to report the transactions and

activities on where cash is going and what is coming in. By keeping track of all the monies in the

company, the company is able to report the data on how much the profit and loss has been made

in that particular term. Studying the Income Statement for XYZ Company ending in 2012 will

help me to prepare the Income Statement ending for 2013.

With the forecasting assumptions made by the CEO, Gross Profits dropped by $464,400.

Because the operating revenues barely increased by half a percent, it did not match up to the

increase of raw materials that counted for 40% of the Cost of Goods Sold. This means not

enough products were sold to cover the increase in the materials used. XYZ Company actually

lost more money because of the inventory of raw materials that they had left over.

Compared with 2012 Income Statement for the Net Operating Income, it actually

dropped $454,400. Because none of the expenses changed rates and stayed the same, the

contribution to the changes in the operating income greatly influenced the way expenses were

spent. Just because depreciation went down 10%, there was measly a drop that affected the

outcome of the extra materials left over. The expenses represented a fixed rate rather than a

mixed or variable rate since the monies did not change when comparing it to the supply of

COGS.

Looking at the EAT (Earnings after Taxes) for 2013, it looks like the company loss did

not break-even from their operating income. The company lost $396,200. XYZ Company did not

earn enough revenue to cover for their expenses and taxes. The fixed rates for the taxes are what

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killed the company. Also, the payments for the loans stayed the same, the company was not able

to be flexible with their spending while trying to get rid of their liabilities.

The Earnings Per Share drastically dropped as well since it depends on the work load of

how well the company is managing their business. Because there is no profit, the earnings will

drop as well. Earnings per share was dropped to ($1.25). The company will not be able to afford

payouts and so forth due to the financial standing of the company.

Looking at the Retained Earnings for 2013, it is at a current ($224,700). Retained

Earnings severely dropped because of the outcomes that resided in the assumptions after the

2012 Income Statement. With the overload in materials and products that haven’t been sold,

expenses stayed the same. There were no new significant changes that would cause a greater

shift in the positive direction than a big drop like these made to the operating income and COGS.

Seeing this big of a drop, the CEO will have to realize that there is major damage that

needs to be corrected and will have to start looking at the production and manufacturing side of

the business to pinpoint where bottlenecking is occurring. The time-consuming process also

needs to be eliminated and start afresh so that a new process can be put in place to reduce

expenses and the use of raw materials. When forecasting, the user needs to look at previous

statements in order to predict what the average will look like. Taking a peak at peak and off

seasons will dramatically help as well to where things are going wrong and things are going

right. On top of that, expenses are staying the same even though income is not generating fast

enough. The user would highly need to look at where the expenses are coming from and how to

decrease the allocation of monies going to that direction. Also, the taxes are unavoidable. XYZ

Company needs to carefully look at their system and processes put in place and dictate whether

or not it needs to improve in order to generate a better sizable income for the ending year.

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References

Accounting Coach, Income Statement. (n.d) retrieved 2 May 2016, from Accounting Coach Web

Site: http://www.accountingcoach.com/income-statement/explanation

Investopedia Editorial Team, Accounting Basics: Financial Statements. (n.d) retrieved 2 May

2016, from Investopedia Web Site:

http://www.investopedia.com/university/accounting/accounting5.asp

Investopedia Editorial Team, Income Statement. (n.d) retrieved 2 May 2016, from Investopedia

Web Site: http://www.investopedia.com/university/accounting/accounting5.asp