Question

Use this information to prepare a financial statement for company ABC Co for the 12 months ended 31st December 2019

Distribution expenses $ 8,000

Salaries and wages related to selling product $ 16,000

Advertisements and promotions for Product $ 5,000

Salaries and wages for administrative staff $ 7,500

Office supplies expenses $ 1500

administrative utility expenses $ 3000

Depreciation on office equipment $ 750

Interest expense $ 1500

Cost of direct material purchase for product Alpha $ 165,000

Cost of stock at the beginning of the period Alpha $ 15,000

Cost of stock at the end of the period Alpha $ 20,000

Revenue from sale of Product Alpha $ 312,500

Based on the above information prepare a basic financial statement and identify the following.

i. Gross Profit (3)

ii. Total operating expenses (Show separately your selling distribution expenses and administrative expenses) (3)

iii. Operating income (3)

iv. Net income (Assume your business is taxed at 4%) (3)

v. Correct Income statement with clear separation of items (4)

Answer 1

Income Statement of Company ABC
Particulars	Amount	Amount	Amount
Sales Revenue			$312,500
Cost of Sales
Beginning Stock	$15,000
Add Purchases of stock	$165,000
Less Ending Stock	($20,000)
			($160,000)
Gross Profit			$152,500
Operating Expenses
Sellinga nd Distribution Expenses
Salaries and wages	$16,000
Advertisements and Promotions	$5,000
Distribution expenses	$8,000
		$29,000
Administrative Expenses
Salaries and wages	$7,500
Office Supplies	$1,500
Utilities	$3,000
Depreciation	$750
		$12,750
Total Operating Expenses			($41,750)
Operating Income			$110,750
Non-Operating Expenses
Interest Expense			($1,500)
Net Income before taxes			$109,250
Income Tax @ 4%			($4,370)
Net Income after Taxes			$104,880

i. Gross Profit is $ 152,500

ii. Total operating expenses are $41,750

iii. Operating income is $110,750

iv. Net income after tax is $104,880