Comparative Income Statements for Jameson Inc Required
the President and Management Believe That the Company Performed

question 136

Essay

Comparative income statements for Jameson Inc.are as follows:

$\begin{array}{|l|r|r|}\hline &{\mathbf{2 0 1 8}} &{\mathbf{2 0 1 7}} \\\hline \text { Sales } & \$ 2,000,000 & \$ 600,000 \\\hline \text { Cost of sales } & 800,000 & \underline{400,000} \\\hline \text { Gross profit } & \$ 1,200,000 & \$ 200,000 \\\hline \text { Operating expenses } & 520,000 & \underline{120,000} \\\hline \text { Operating income } & \$ 680,000 & \$ 80,000 \\\hline \text { Loss on sale of subsidiary } & (800,000) & 0 \\\hline \text { Net income (loss) } & \$(120,000) & \$ 80,000 \\\hline\end{array}$ Required
The president and management believe that the company performed better in 2018 than it did in 2017.Write the president's letter to be included in the 2018 annual report.Explain why the company is financially sound and why shareholders should not be alarmed by the $120,000 loss in a year when gross profit increased significantly.

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Definitions:

Pre-existing Duty Rule

A legal principle stating that a party's promise to perform a duty that is already owed under a contract does not constitute valid consideration for a new agreement.

Synthetic Fuel Oil

A liquid fuel produced from coal, natural gas, or biomass through chemical processes rather than by natural geological processes.

Legal Terminology

The specialized language used that relates to laws or the legal process, including terms of art, phrases, and concepts.

Sufficiency of Consideration

The legal principle that the value exchanged in a contract must be both legally sufficient and something of value, in order for the contract to be enforceable.