Bill Porter has a small business to distribute nails, screws and other fasteners
ID: 1098550 • Letter: B
Question
Bill Porter has a small business to distribute nails, screws and other fasteners to the construction industry in Las Vegas, NV. It is July 2013 and Bill wants to know if he made a profit in the second quarter. He asks his accountant, Elaine, to prepare the financial statements for the quarter. Elaine collects the financial data in the table below. (a) Calculate the net margin (net profit) after taxes for the second quarter. (b) Did Bill make a profit in the second quarter?
Sales in the quarter $1,297,000
Annual salary and expenses for the two sales people $263,000
Cost of goods for the quarter $901,000
Long term assets at quarter end $3,452,000
Long term debt at quarter end $1,551,000
Corporate tax rate 35%
Fixed expenses for the quarter $238,000
Accounts receivable for the quarter $592,000
Please show work for points. Thank you!
Explanation / Answer
net profit =( sales-( annual salary and expenses+cost of goods sold+fixed expenses))*(1-tax rate)
=(1297000-(263000+901000+238000))*(1-0.35)
= -$68,250
so answer : Net margin = -$68,250
note: negative sign indicates loss
b) As we got net margin negative, Bill is not making profit, he is making losses
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