Question

Pandora Corporation operates several factories in the Midwest that manufacture consumer electronics. The December 31, 2021, year-end trial balance contained the following income statement items:

 

Required:
Calculate the company’s operating income for the year.

 

Answer 1

Operating revenues:

Sales revenue                                              $12,500,000

 Total operating revenues                                                $12,500,000

Less operating expenses:
   Cost of goods sold                                       $6,200,000
  Selling expense                                                   620,000
   General and administrative expense          1,520,000
  Research and development expense           1,200,000                      

 Total operating expenses                                                    9,540,000

Operating income                                                                $2,960,000

 

Interest revenue, loss on sale of investments, and interest expense are all nonoperating items and would be reported in the income statement as “Other income (expense)” below operating income. Income tax expense is a line item in the income statement shown after nonoperating income (expense). 

Operating income                                                                $2,960,000