Question

A partial income statement for a company's most recent fiscal year follows:

Sales	$400,000
Inventory, January 1	$210,000
Add purchases	(a) ____
Goods available for sale	(b) ____
Inventory, December 31	235,000
Cost of goods sold	(c) ____
Gross margin	125,000
Deduct expenses:
Selling	(d) ____
Administrative	(e) ____
Income before taxes	(f) ____
Income taxes	(g) ____
Net income	(h) ____
Earnings per share (5,000 shares outstanding)	$2.10

Additional data:
Selling expenses are 20 percent of sales, administrative expenses are 10 percent of cost of goods sold; the income tax rate is 40 percent.

Required:

Supply dollar amounts for blanks a through h. Computations may not be in the order presented. You do not need to show your work for the calculations. Part marks will not be awarded.

1. ____________

2. ____________

3. ____________

4. ____________

5. ____________

6. ____________

7. ____________

8. ____________

Answer 1

a) Purchase = 510000-210000 = 300000

b) Goods of available for sale = 275000+235000 = 510000

c) Cost of goods sold = 400000-125000 = 275000

d) Selling expense = 400000*20% = 80000

e) Administrative expense = 275000*10% = 27500

f) Income before tax = 125000-80000-27500 = 17500

g) Income tax = 17500*40% = 7000

h) Net income = 17500-7000 = 10500