Question

Presented below are selected ledger accounts of Woods Corporation at December 31, 2015.

Cash	$185,000		Salaries and wages expense (sales)	$284,000
Inventory (beginning)	535,000		Salaries and wages expense (office)	346,000
Sales revenue	4,175,000		Purchase returns	15,000
Unearned sales revenue	117,000		Sales returns and allowance	79,000
Purchases	2,786,000		Freight-in	72,000
Sales discounts	34,000		Accounts receivable	142,500
Purchase discounts	27,000		Sales commissions	83,000
Selling expenses	69,000		Telephone and Internet expense (sales)	17,000
Accounting and legal services	33,000		Utilities expense (office)	32,000
Insurance expense (office)	24,000		Miscellaneous office expenses	8,000
Advertising expense	54,000		Rent revenue	240,000
Delivery expense	93,000		Loss on sale of division	60,000
Depreciation expense (office equipment)	48,000		Interest expense	176,000
Depreciation expense (sales equipment)	36,000		Share capital—ordinary ($10 par)	900,000

Woods's effective tax rate on all items is 30%. A physical inventory indicates that the ending inventory is $686,000.

Requirement:

Prepare a 2015 income statement for Woods Corporation

Answer 1

Woods Corporation
Income statement
for the Year ended December 31, 2015
Sales revenue			$ 4,175,000
Sales discounts			($ 34,000)
Sales returns and allowance			($ 79,000)
Net sales			$ 4,062,000
Cost of goods sold:
Inventory (beginning)		$ 535,000
Purchases	$ 2,786,000
Purchase discounts	($ 27,000)
Purchase returns	($ 15,000)
Freight-in	$ 72,000
Net purchases		$ 2,816,000
Goods available for sale		$ 3,351,000
Inventory (ending)		($ 686,000)
Cost of goods sold			$ 2,665,000
Gross profit			$ 1,397,000
Operating expenses:
Selling expenses	$ 69,000
Advertising expense	$ 54,000
Delivery expense	$ 93,000
Depreciation expense (sales equipment)	$ 36,000
Salaries and wages expense (sales)	$ 284,000
Telephone and Internet expense (sales)	$ 17,000
Total selling expenses		$ 553,000
Office and Administrative expenses:
Insurance expense (office)	$ 24,000
Depreciation expense (office equipment)	$ 48,000
Utilities expense (office)	$ 32,000
Miscellaneous office expenses	$ 8,000
Salaries and wages expense (office)	$ 346,000
Total office and administrative expenses	$ 458,000
Total operating expenses			$ 1,011,000
Operating income			$ 386,000
Other income and expenses:
Rent revenue	$ 240,000
Interest expense	($ 176,000)
Total other income			$ 64,000
Income before income tax			$ 450,000
Income tax [$450,000 x 30%]			$ 135,000
Net income			$ 315,000
EPS [$315,000 ÷ 90,000]			$ 3.50