Question

A . Prepare income statements for the XXX company in December 2020. Use the following information please :

B. What is the Gross Margin %?

C. What is Basic EPS? What is Diluted EPS?

***************Use below Information *********

Cost of Goods Sold. 600,000

Purchased patents 50,000

Sales Returns 30,000

Sales 1,505,000

Allowance for Doubtful Accounts 60,000

Trademarks 15,000

Sales and marketing expenses 220,000

Accounts Payable 65,000

Engineering Expenses 300,000

Contributed Capital 300,000

G&A Expenses 165,000

Goodwill 150,000

Sales Discounts 18,000

Sales Tax Payable 5,000

Interest Expense 32,000

Tax rate 35%

Loss on investments 10,000

Copyrights 30,000

Wages payable 100,000

Losses on division scheduled

for closing 100,000 before tax.

There are 500,000 average common shares outstanding and 100,000 equivalent shares.

Answer 1

XXX company
Income Statement
For year ended Dec 2020
Sales	$ 1,505,000.00
Less: Sales Retun	$      30,000.00
Less:  Sales Discount	$      18,000.00
Net Sales		$ 1,457,000.00
Less: Cost of good sold		$    600,000.00
Gross Profit		$    857,000.00
Less: Operating Expenses
Sales and marketing expenses	$    220,000.00
Engineering Expenses	$    300,000.00
G&A Expenses	$    165,000.00
Total Operating Expenses		$    685,000.00
Income from operations		$    172,000.00
Non-operating income (expense)losses  items:
Loss on investment		$      10,000.00
Interest		$      32,000.00
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$    130,000.00
Less: Tax rate 35%		$      45,500.00
NET INCOME FROM CONTINUING OPERATIONS		$      84,500.00
Income (loss) from discontinued operations, net of income taxes (10000 x (1-35%)		$      (6,500.00)
NET INCOME		$      78,000.00
Gross Profit Margin = GP/ Sales
Gross Profit Margin = 857,000/ 1457000	58.82%
Basic EPS =  Net Income/ Average common shares outstanding
Basic EPS =  78000 / 500,000	$               0.16
Diluted EPS = 78000/(500,000 + 100,000)	$               0.13