Question

Presented below is information for Sheridan Company for the month of January 2017.

Cost of goods sold		$204,300		Rent expense		$32,300
Freight-out		6,100		Sales discounts		8,900
Insurance expense		13,800		Sales returns and allowances		17,500
Salaries and wages expense		62,000		Sales revenue		397,500
Income tax expense		5,500		Other comprehensive income (net of $400 tax)		2,000

Answer 1

Computation of taxable profit and the amount of tax.

Particulars	Amount ($)	Amount ($)
Incomes:
Sales revenue	397,500.00
Less: Sales return and allowances	17,500.00
	380,000.00
Less: Sales discount	8,900.00
		371,100.00
Other comprehensive income gross (2000 +400)		2,400.00
		373,500.00
Expenditures:
Cost of goods sold	204,300.00
Freight out	6,100.00
Insurance expense	13,800.00
Salaries and wages	62,000.00
Rent expense	32,300.00
		318,500.00
Profit before tax		55,000.00
Less: Tax @30% (55000 x 30%)		16,500.00
Profit after tax		38,500.00

Note: The income tax on the profit is calculated taking into consideration that the applicable rate of income tax on the amount of profit is 30%.