Condensed Income Statements for Newlon Company Are Shown Below for Two

question 58

Essay

Condensed income statements for Newlon Company are shown below for two years.
$\begin{array}{lcc}&2010&2009\\ \text { Net sales } & \$ 75,000 & \$ 90,000 \\\text { Cost of goods sold } & 45,000 & 54,000 \\ \text { Gross margin } & \$ 30,000 & \$ 36,000 \\ \text { Operating expenses } & 15,000 & 15,000 \\ \text {Income before income taxes } & \$ 15,000 & \$ 21,000 \\\end{array}$

Compute the corrected income before income taxes for 2009 and 2010 assuming that the inventory as of the end of 2009 was mistakenly understated by $3,000.

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Definitions:

Perfectly Competitive System

A market structure where many firms offer products or services that are similar, leading to a high level of competition and prices that reflect the true supply and demand.

Allocation of Resources

The process of assigning available resources, both human and material, to specific uses to satisfy the needs and wants of a society.

Equal Distribution

The concept of distributing resources or income in a way that every member of a society gets an equal share.

Marginal Cost

The expense incurred from the manufacture of an extra single unit of a product or service.