Question

3. Selected accounts from the December 31, 2015, adjusted trial balance of the Hodges Company are shown below.

	Debit	Credit
Inventory, January 1, 2015	$30,000
Sales Revenue		$90,000

Sales Returns and Allowances	3,000
Purchases	40,000
Freight-In	2,500
Selling Expenses	14,000
Administrative Expenses	8,000
Bad Debts Expense	500
Depreciation Expense-Building	1,500
Interest Expense	2,000
Income Tax Expense	2,200
Dividends	2,100

On December 31, 2015 the inventory was $18,000.

Required: Prepare a 2015 income statement for the Hodges Company.

ANSWER:

Answer 1

Hodges Company
Income Statement
For the year ended Decembe 31, 2015
Particulars	Amount	Amount
Sales	90,000
Returns and Allowances	3,000
Net Sales (Sales less returns)		87,000
Cost of goods sold
Beginning Inventory	30,000
Add: Purchases	40,000
Less: Ending Inventory	(18,000)
		52,000
Gross Income (Net Sales - CGS)		35,000
Operating expenses:
Freight-In	2,500
Depreciation expense - Building	1,500
Bad debt expense	500
		4,500
Selling and Administrative expenses		22,000
Interest expense		2,000
Total expenses		28,500
Net Income before taxes (Gross Income - Expenses)		6,500
Less: Income tax expenses		2,200
Net Income after taxes		4,300
Less: Dividends declared and paid		2,100
Net Income transferred to retained earnings		2,200