Question

In: Accounting

Trial balance Debit Credit Cash 15300 Accounts receivable 10800 Inventory 1/1/20 3800 Prepaid insurance 2000 Equipment...

Trial balance

Debit

Credit

Cash

15300

Accounts receivable

10800

Inventory 1/1/20

3800

Prepaid insurance

2000

Equipment

37000

Accumulated depreciation

5600

Notes payable

1500

Accounts payable

6100

Unpaid salaries

3600

Share capital

3000

Retained earnings

10600

Dividends

5300

Sale

81000

Purchase of inventory

24600

Market cost

4600

Insurance

3500

Salaries

18000

Total

124900

124900

The inventory costing was 1500. Notes payable was taken at the beginning of 2018 to five years, 5% interest, the interests are paid at the beginning of each year. The equipment uses the straight-line method, 7000 each year. Salary bonuses for December are 1500 has not been recorded. Income tax is 20% of the net income.

A) Make an income statement for the year 2020.

B) Calculate gross profit and gross profit rate.

C) Calculate EBITDA and EBITDA margin

D) Make a retained earnings statement for the period 1/1 – 31/12 2020

Please respond quickly

Solutions

Expert Solution

The income statement for the year 2020 is as follows :

Particulatrs Amount
Sales 81,000
Cost of goods sold (3,800 + 24,600 - 1500) (26,900)
Gross Profit 54,100
Operating expenses :
Insurance 3,500
Salaries and bonus salaries 19,500
Market cost 4,600 27,600
Earning before Interest taxes depreciation and amortization (EBITDA) 26,500
Other Expenses :
Interest on notes payable 75
Depreciation on equipment 7,000 7,075
Earning before taxes 19,425
Income Taxes (3885)
Net Profit 15,540

B) The gross profit for the year is $54,100.

The gross profit rate will be equivalent to 66.8% (54,100/81,000)

C) The EBITDA is equivalent to $26,500.

The EBITDA Margin rate will be equal to 32.71% (26,500/81,000)

D) Retained earnings statement for the period 1/1 - 31/12/2020 is as follows :

Particulars Amount ($)
Retained earnings as on 1/1/2020 10,600
Add : Net income for the year 15,540
Less : Dividends for the period (5,300)
Retained earnings as on 31/12/2020 20,840

ekkarill92 answered 1 year ago
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