The adjusted trial balance of Foster Products Company included the following bal
ID: 2338770 • Letter: T
Question
The adjusted trial balance of Foster Products Company included the following balances for 12- 31-15, which was the first year of operations
Accounts Payable $ 18000 -Credit
Accumulated Depreciation 35000 -Credit
Advertising Expense 17800 -Debit
Cash 7400 -Debit
Common Stock 3000 -Credit
Cost of Goods Sold 75800 -debit
Depreciation Expense 3000 -Debit
Dividends 2000 _debit
Equipment 81800 -Debit
InsuranceExpense 2800 -Debit
Interest Revenue 500 -Credit
Inventory 24000-Debit
Prepaid Insurance 3800 -Debit
Rent Expense 26000 -Debit
Retained Earnings 40000 -Credit
Salaries Expense 63000 -Debit
Sales 226600 -Credit
Sales Discounts 1000 Debit
Sales Returns and Allowances 5000 -Debit
Supplies 3700 -Debit
Supplies Expense 6000 Debit ________
Total debit 323100 Total Credit 323100
Rent expense and salaries expense are equally divided between selling activities and general and administrative activities.
1. Prepare a Multiple Step Income Statement for 12-31-15. (Categorize the Operating Expenses into Selling Expenses and General/Administrative Expenses.
2. Calculate the Following Ratios AND provide a brief interpretation about each one. a. Return on Assets b. Gross Margin Ratio c. Profit Margin
Explanation / Answer
Income statement
Particulars
Amount ($)
Amount ($)
Revenue:
Sales
226,600.00
Less: Sales returns and allowances
5,000.00
Net sales
221,600.00
Less: Cost of goods sold
75,800.00
Gross profit
145,800.00
Add: Interest revenues:
500.00
(A): Revenue before deducting expenditures
146,300.00
Expenditures:
Salaries expenses
63,000.00
Supplies expenses
6,000.00
Rent expense
26,000.00
Insurance
2,800.00
Sales discount
1,000.00
Depreciation expense
3,000.00
Advertisement expenditures
17,800.00
(B): Total expenditures
119,600.00
Income before tax (A-B)
26,700.00
Less: Income tax @40% assuming
10,680.00
Profit after tax
16,020.00
All ratios are in percentages (%):
Return on assets (Net income x 100/ Total assets)
Total assets
cash
7,400.00
Equipment
81,800.00
Inventory
24,000.00
Prepaid insurance
3,800.00
Total assets
117,000.00
Profit after tax
16,020.00
Return on assets (Net income x 100/ Total assets)
13.69
Gross profit margin (Gross profit x 100/ Net sales)
Gross profit
145,800.00
Net Sales
221,600.00
Gross profit margin (Gross profit x 100/ Net sales)
65.79
Profit margin (Net income x 100/ Net sales)
Net income
16,020.00
Net Sales
221,600.00
Profit margin (Net income x 100/ Net sales)
7.23
Income statement
Particulars
Amount ($)
Amount ($)
Revenue:
Sales
226,600.00
Less: Sales returns and allowances
5,000.00
Net sales
221,600.00
Less: Cost of goods sold
75,800.00
Gross profit
145,800.00
Add: Interest revenues:
500.00
(A): Revenue before deducting expenditures
146,300.00
Expenditures:
Salaries expenses
63,000.00
Supplies expenses
6,000.00
Rent expense
26,000.00
Insurance
2,800.00
Sales discount
1,000.00
Depreciation expense
3,000.00
Advertisement expenditures
17,800.00
(B): Total expenditures
119,600.00
Income before tax (A-B)
26,700.00
Less: Income tax @40% assuming
10,680.00
Profit after tax
16,020.00
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