Given the following information for the fiscal year ended June 30, 2001:
Product sales: 28,189,612
Service sales: 11,688,793
Cost of goods sold- products: 10,633,956
Cost of goods sold- services: 5,869,106
Operating expense: 14,904,460
Pre-tax operating income: 8,470,883
Income from continuing operations: 5,525,185
Net accounts receivable as of June 30: 7,212,970
Cost of goods sold % - products: 37.7%
Also this information was given as well.
For fiscal year ended June 30, 2000
Product sales: 22,226,504
Service sales: 5,891,909
Cost of goods sold- products: 8,033,867
Cost of goods sold- services: 2,974,456
Operating expense: 10,568,861
Pre-tax operating income: 6,541,229
Income from continuing operations: 4,301,742
Net accounts receivable as of June 30: 4,153,677
Cost of goods sold % - products: 36.1%
For fiscal year ended June 30, 2002
Product sales: 37,215,161
Service sales: 17,327,525
Cost of goods sold- products: 15,057,167
Cost of goods sold- services: 7,942,952
Operating expense: 20,809,281
Pre-tax operating income: 10,733,286
Income from continuing operations: 7,410,752
Net accounts receivable as of June 30: 20,316,730
Cost of goods sold % - products: 40.5%
Did a company overstate its revenue by around 35 million in the fiscal year ended June 30, 2001?
My guess is that they did overstate revenue. But it was only by 12,738,155
which I got from adding income from continued operations and net account receivable. Revenue would include both cash and credit sales so that is my rationale for how I came up with that answer.
I just wanted to verify whether I did this correctly. Thanks in advance for the assistance.
To determine if a company overstated its revenue in the fiscal year ended June 30, 2001, we need to compare the reported revenue with the calculated revenue based on the given information.
The formula to calculate revenue is:
Revenue = Product sales + Service sales
From the given information:
Product sales: 28,189,612
Service sales: 11,688,793
Using the formula, we can calculate the reported revenue as:
Reported revenue = 28,189,612 + 11,688,793 = 39,878,405
Now let's calculate the actual revenue based on the given information. We will add the income from continuing operations and net accounts receivable:
Income from continuing operations: 5,525,185
Net accounts receivable: 7,212,970
Actual revenue = Income from continuing operations + Net accounts receivable = 5,525,185 + 7,212,970 = 12,738,155
Comparing the reported revenue with the actual revenue:
Reported revenue - Actual revenue = 39,878,405 - 12,738,155 = 27,140,250
Therefore, the company did overstate its revenue by approximately 27,140,250 in the fiscal year ended June 30, 2001, not by 35 million as you initially estimated.
It's important to note that revenue does not include the cost of goods sold or operating expenses. It represents the total amount of sales generated by a company during a specific period.