Question

In: Accounting

ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common...

ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019.

Advertising expense $24,100
Depreciation expense (on service van) 16,200
Income taxes expense 15,150
Interest expense 10,100
Rent expense 58,400
Insurance expense 11,900
Salaries expense (for administrative personnel) 195,600
Service revenue 933,900
Supplies expense 66,400
Utilities expense 26,100
Wages expense (for service technicians) 448,300

Required:

1. Prepare a single-step income statement for ERS for 2019.

Note: For grouped values (e.g. revenues or expenses), enter individual amounts as positive values. If the total for the group is subtracted or a overall negative amount, enter using a minus sign.

ERS Inc.
Income Statement
For the Year Ended December 31, 2019
Revenues:
Service revenue $
Expenses:
Wages expense $
Salaries expense
Supplies expense
Rent expense
Utilities expense
Advertising expense
Depreciation expense
Insurance expense
Interest expense
Income taxes expense
Total expenses
Net income $

Feedback

1. Prepare an income statement with proper form. Start with company name, statement type, and date. Total revenue minus total expenses = net income.

2. Conceptual Connection: Compute net profit margin for ERS. Round your answer to one decimal place.
%

If ERS is able to increase its service revenue by $100,000, what should be the effect on future income?

If ERS had an incremental increase in revenue of $100,000, based on the net profit margin computed, what is the additional potential profit?
$

Solutions

Expert Solution

Requirement 1
ERS Inc.
Income Statement
For the Year Ended December 31, 2019
Revenues:
Service revenue       933,900
Expenses:
Wages expense        448,300
Salaries expense        195,600
Supplies expense          66,400
Rent expense          58,400
Utilities expense          26,100
Advertising expense          24,100
Depreciation expense          16,200
Insurance expense          11,900
Interest expense          10,100
Income taxes expense          15,150
Total expenses       872,250
Net income        61,650
Requirement 2
Net Profit Margin = (Net income / Total Revenue) X100
                                  =61650 /933900 X100
                                  =6.6%
If ERS is able to increase its service revenue by $100,000, what should be the effect on future income
Future Income = 61650 +100000
                                  = $ 161,650
Asuming that there is no increase in Expenditure
Net Profit Margin = (Net income / Total Revenue) X100
                                  =161650 /933900 X100
                                  =17.31%
Additional potential Profit = 100,000)X17.31 %
                                  = $17,310

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