Question

In: Accounting

The following information is available for Labrador Ltd. for calendar 2022: Cost of goods sold........................................................   ...

The following information is available for Labrador Ltd. for calendar 2022:

Cost of goods sold........................................................    1,190,000

Income tax expense......................................................           9,000

Interest expense............................................................         30,000

Interest income..............................................................         38,000

Operating expenses......................................................       194,000

Sales............................................................................. $1,406,000

Instructions

(a)   Use the above information to prepare a multiple-step statement of income for the year ended December 31, 2022.

(b)   Calculate the gross profit margin and the profit margin for 2022.

Solutions

Expert Solution

Solution: A
MULTIPLE STEP - INCOME STATEMENT
Amount Amount
Sales $       1,406,000
Less: Cost of Goods Sold   $       1,190,000
Gross Margin $          216,000
Less: Operating Expenses $          194,000
Operating Profit $             22,000
Other Income (Expenses)
Interest Expenses $             -30,000
Interest Income $              38,000
$               8,000
Pre Tax Income $             30,000
Income Tax Expenses $               9,000
Net Income $             21,000
Solution: B
Gross Margin = $ 216,000 / $ 1,406,000 = 15.36%
Profit Margin = $ 21,000 / $ 1,406,000 = 1.49%

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