a. Carefully review the income statement in Figure 12.6 (Income Statement for Stress-Buster Company) and the text discussion related to this figure. Describe each of the following items shown on this income statement in your own words: Sales, Cost of goods sold, Operating expenses, and Net income. That is, describe what each of these items represents and provide the dollar amount for each item. Ill give you the answer to the first item as an example:

b. Carefully review the balance sheet in Figure 12.18 (End-of-Year Balance Sheet for The College Shop) and the text discussion related to this figure. Describe each of the following items shown on this balance sheet in your own words: Cash, Accounts receivable, Inventory, Accounts payable, and Loan payable. That is, describe what each of these items represents and provide the dollar amount for each item.

c. Carefully review Figure 12.21 (Comparative Income Statement Using Vertical Percentage Analysis). Did The College Shops financial performance improve or deteriorate from 20X6 to 20X7? Provide several sentences with information that supports your answer. Note that 20X7 is the first set of data shown on the left, and 20X6 is the second set of data shown on the right.

Stress-Buster Company Income Statement Month Ended September 30, 20X1 $1,000 600 400 Sales (100 x $10) Less cost of goods sold (100 x $6) Gross profit (100 X $4) Less operating expenses Salaries Advertising Table rental Net income (profit) $100 The College Shop Balance Sheet As of December 31, 20X6 $70,000 90,000 80,000 240,000 Assets Current assets Cash Accounts receivable Inventory Total current assets Long-term assets Furniture, displays, and equipment Less: accumulated depreciation Total long-term assets Total assets Liabilities and owner's equity Current liabilities Accounts payable Long-term liabilities Loan payable (due in 4 years) Owner's equity (150,000 1 30,000) Total liabilities and owner's equity 150,000 (30,000) 120,000 $360,000 $80,000 100,000 180,000 $360,000 The College Shop Comparative Income Statement Years Ended December 31, 20x7 and 20X6 [Using vertical percentage analysis showing each item as a % of sales] 12/31/20X7 12/31/20X6 Amount Percent Amount Percent Sales $600,000 100 $500,000 100 Less cost of goods sold 387,000 275,000 Gross profit 213,000 225,000 Less operating expenses 180,000 30 175,000 Operating income 33,000 6 50,000 Less interest Less income taxes 2 1 10,000 5,000 $18,000 10,000 10,000 Inn Net income 3% $30,000 6%