The following percentages apply to Rundle Company for Year 3 and Year 4: Year 4 Year...

The following percentages apply to Rundle Company for Year 3 and Year 4: Year 4 Year 3 Sales 100.0 % 100.0 % Cost of goods sold 61.0 64.1 Gross margin 39.0 35.9 Selling and administrative expense 26.5 20.6 Interest expense 2.3 2.0 Total expenses 28.8 22.6 Income before taxes 10.2 13.3 Income tax expense 5.5 7.1 Net income 4.7 % 6.2 % Required Assuming that sales were $515,000 in Year 3 and $595,000 in Year 4, prepare income statements for the two years.

Expert Solution

Ans.
Income Statement of Rundle Company
Particulars	%	Amount $
Year 4	Year 3	Year 4	Year 3
Sales	100.0	100.0	5,95,000	5,15,000
Less-Cost of Goods Sold	61.0	64.1	3,62,950	3,30,115
Gross Margin	39.0	35.9	2,32,050	1,84,885
Less- Selling & Admin. Expenses	26.5	20.6	1,57,675	1,06,090
Income before Interest & Tax	12.5	15.3	74,375	78,795
Less- Interest Expense	2.3	2.0	13,685	10,300
Income before Tax	10.2	13.3	60,690	68,495
Less- Taxes	5.5	7.1	32,725	36,565
Income After Taxes	4.7	6.2	27,965	31,930

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