Question

Kelly, Inc. produces and sells one product. You have been hired to prepare a traditional income statement for the month of January 2018 to be reviewed at a board of directors presentation. Your statement should be properly formatted (with the exception of double underlines which Bb does not include as a formatting option). Where possible, list amounts separately (do not combine like amounts into one line item such as "expenses").

Revenue $9,000,000 Selling price $60,000 per unit Sales commission expense $9,000 per unit Variable administrative expense $2,000 per unit Sales salaries $520,000 Total fixed administrative expense $450,000 Beginning inventory $1,700,000 Ending inventory $1,900,000 Merchandise purchases $4,500,000

Answer 1

Before preparing income statement we need to find Cost of goods sold.

COGS = Opening inventory + purchases – Ending inventory

           = 1700000 + 4500000 – 1900000

          = 4300000

Revenue = 9000000

Selling price = 60000

Units sold = 9000000/ 60000

                    = 150

Income statement
Sales	9000000
-COGS	4300000
Gross profit	4700000
-Administrative Expense (2000 * 150)	300000
-Sales Commission Expense (9000* 150)	1350000
-Sales salaries	520000
-Fixed cost	450000
Net income	2080000

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Hope this answer your query.

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