Question

In its income statement for the year ended December 31, 2017, Sandhill Co. reported the following condensed data.

Salaries and wages expenses     $697,500                             

Loss on disposal of plant assets $ 125,250

Cost of goods sold 1,480,500                     

Sales revenue   3,315,000

Interest expense 106,500                            

Income tax expense 37,500

Interest revenue 97,500                              

Sales discounts   240,000

Depreciation expense 465,000                  

Utilities expense 165,000

Prepare a multiple-step income statement.

Calculate the profit margin and gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%.)

Profit Margin      ??? %

Gross profit rate ??? %

Answer 1

MULTIPLE-STEP INCOME STATEMENT

SANDHILL CO
Income Statement
For the Year Ended December 31, 2017
Sales Revenue
Sales	$33,15,000
Less : Sales Discount	(240,000)	3,075,000
Less : Cost of goods sold		(14,80,500)
Gross Profit		1,594,500
Operating Expenses
Salaries and Wages	697,500
Depreciation expense	465,000
Utilities Expenses	165,000
Total Operating Expenses		(13,27,500)
Total Operating Income		267,000
Other Income / (Expenses)
Loss on disposal of plant assets	(125,250)
Interest Expenses	(106,500)
Interest Revenue	97,500
Total Other Expenses, Net		(134,250)
Net Income Before Tax		132,750
Less : Income Tax Expenses		(37,500)
Net Income after Tax		95,250

Profit Margin = [Net Income / Net Sales] x 100

= [$95,250 / 30,75,000] x 100

= 3.1%

Gross profit rate = [Gross Profit / Net Sales ] x 100

= [$15,94,500 / 30,75,000] x 100

= 51.9%