In: Accounting
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.
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% | |||