Question

In 2012, XYZ Inc., a medical equipment distributor, sold 10,000 units of its hospital beds at an average price of $500 per unit. The company reported estimated returns and allowances of $200,000. The company purchased 11,000 units of its product from its manufacturer in 2012 at an average cost of $350 per unit. XYZ began 2012 with 1,000 units of its product in inventory (carried at an average cost of $300 per unit). Operating expenses (excluding depreciation) in 2012 were $400,000, and the depreciation expense was $100,000. XYZ had $2,000,000 in debt outstanding throughout all of 2012, which carried an average interest rate of 10%. The company’s tax rate is 40%. Its fiscal year runs from January 1 through December 31. Given this information, prepare the following documents: a. XYZ’s 2012 income statement b. XYZ’s 2012 ending inventory balance (both in unit and in dollar terms)

Answer 1

a	Income Statement
		$
	Sales (10000*500)	50,00,000
	Purchase (11000*350)	38,50,000
	Operating Profit	11,50,000
	Operating expenses	4,00,000
	Depreciation	1,00,000
	Interest(2000000*10%)	2,00,000
	Profit	4,50,000
	Less Tax(40%)	1,80,000
	Profit after tax	2,70,000
b	Ending inventory
	Units	1,000
	Average cost per unit	300
	Total value of inventory	3,00,000