Multiple-Step Income Statement and Profit Margin The following income statement
ID: 2395501 • Letter: M
Question
Multiple-Step Income Statement and Profit Margin
The following income statement items, arranged in alphabetical order, are taken from the records of Corbin Enterprises for the current year:
Assume that Corbin Enterprises classifies all operating expenses into two categories: (1) selling and (2) general and administrative.
Required:
1. Prepare a multiple-step income statement for the current year.
2. What advantage do you see in multi-step income statement?
3. Compute Corbin's profit margin. Round your answer to one decimal place.?
4. Reflect on the profit margin determined above. What does this mean??
Advertising expense $9,000 Rent expense—office $ 26,400 Cost of goods sold 150,000 Rent expense—salesperson's car 18,000 Depreciation expense—computer 4,500 Sales revenue 350,000 Dividend revenue 2,700 Supplies expense—office 1,300 Income tax expense 30,700 Utilities expense 6,750 Interest expense 1,900 Wages expense—office 45,600 Corbin Enterprises Income Statement For the Current Year Operating expenses: Selling expenses: Total selling expenses General and administrative expenses: Total general and administrative expenses Total operating expensesExplanation / Answer
Answers
Multi Step Income Statement, as asked
Sales revenue
$ 350,000.00
Cost of goods sold
$ 150,000.00
Gross Profits (Margin)
$ 200,000.00
Operating Expenses
Selling Expenses:
Advertising expense
$ 9,000.00
Rent expense—salesperson's car
$ 18,000.00
Total selling expenses
$ 27,000.00
General & Administrative expenses:
Rent expense—office
$ 26,400.00
Depreciation expense—computer
$ 4,500.00
Supplies expense—office
$ 1,300.00
Utilities expense
$ 6,750.00
Wages expense—office
$ 45,600.00
Total general & adminstrative expenses
$ 84,550.00
Total Operating expenses
$ 111,550.00
Operating Income
$ 88,450.00
Other revenues & expenses:
Dividend revenue
$ 2,700.00
Interest expense
$ (1,900.00)
Excess of other revenues over other expenses
$ 800.00
Net Income before Income taxes
$ 89,250.00
Income tax expense
$ 30,700.00
Net Income (after tax)
$ 58,550.00
Correct statement is #3: The Income Statement is sub divided into specific sections, and provides the reader with important totals.
A
Net Income (after tax)
$ 58,550.00
B
Sales revenue
$ 350,000.00
C = (A/B) x 100
Profit Margin
16.7%
Correct statement is # 3: For every dollar of Sale, the company has a net Income of $ 0.167
Sales revenue
$ 350,000.00
Cost of goods sold
$ 150,000.00
Gross Profits (Margin)
$ 200,000.00
Operating Expenses
Selling Expenses:
Advertising expense
$ 9,000.00
Rent expense—salesperson's car
$ 18,000.00
Total selling expenses
$ 27,000.00
General & Administrative expenses:
Rent expense—office
$ 26,400.00
Depreciation expense—computer
$ 4,500.00
Supplies expense—office
$ 1,300.00
Utilities expense
$ 6,750.00
Wages expense—office
$ 45,600.00
Total general & adminstrative expenses
$ 84,550.00
Total Operating expenses
$ 111,550.00
Operating Income
$ 88,450.00
Other revenues & expenses:
Dividend revenue
$ 2,700.00
Interest expense
$ (1,900.00)
Excess of other revenues over other expenses
$ 800.00
Net Income before Income taxes
$ 89,250.00
Income tax expense
$ 30,700.00
Net Income (after tax)
$ 58,550.00
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