In its income statement for the year ended December 31, 2010, Maris Company repo

Question

In its income statement for the year ended December 31, 2010, Maris Company reported the following condensed data.

Administrative expense $435,000 Selling expenses $490,000
Cost of goods sold 987,000 Loss on sale of equipment 83,500
Interest expense 68,000 Net sales 2,050,000
Interest revenue 65,000 Income tax expense 20,000

(a) Complete the multiple-step income statement below. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 1.)


MARIS COMPANY
Income Statement


$



Gross profit
Operating expenses
$



Total operating expenses


Income from operations
Other revenue and gains

Other expenses and losses
$







Income before income taxes



Net income
$


(b) Calculate the profit margin ratio and the gross profit rate. (Round to three decimal places, e.g. 0.444.)


Profit margin ratio
Gross profit rate

Explanation / Answer

MARIS COMPANY Income Statement Net sales 2,050,000 Cost of goods sold 987,000 Gross profit 1,063,000 Operating expenses Administrative expense $435,000 Selling expenses $490,000 Total operating expenses 925,000 Income from operations $138,000 Other revenue and gains Interest revenue 65,000 Other expenses and losses Loss on sale of equipment 83,500 Interest expense 68,000 ($86,500) Income before income taxes $51,500 Income tax expense 20,000 Net income $31,500 ======= (b) Calculate the profit margin ratio and the gross profit rate. (Round to three decimal places, e.g. 0.444.) Profit margin ratio (Net income ÷ Net Sales) x 100 = (31,500 ÷ 2,050,000) = 1.54% Gross profit rate (Gross Margin ÷ Net sales) x 100 = (1,063,500 ÷ 2,050,000) x 100 = 51.85%

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