Question

Lemon Auto Wholesalers had sales of $1,480,000 last year, and cost of goods sold represented 76 percent of sales. Selling and administrative expenses were 13 percent of sales. Depreciation expense was $14,000 and interest expense for the year was $10,000. The firm’s tax rate is 30 percent.

a. Compute earnings after taxes in Income statement form:

Answer 1

Lemon Auto Wholesalers
Income statement
Particulars	Amount in $	Amount in $
REVENUE:
Sales		$                  14,80,000
Cost of Goods Sold		$                  11,24,800
(76% of 1,480,000)
Gross Profit		$                     3,55,200
Operating Expenses
Selling and administrative Expenses	$             1,92,400
(13% of 1,480,000)
Depreciation Expenses	$                 14,000
		$                     2,06,400
Operating Income		$                     1,48,800
OTHER INCOME AND EXPENSES
Less: Interest Expneses	$                 10,000
		$                        10,000
Net Income Before Tax		$                     1,38,800
Less: Taxation @ 30%		$                        41,640
Net income After Tax		$                        97,160