Harrington Housewares Company Income Statement For the Year Ended June 30,20xx R

Question

           Harrington Housewares Company
                        Income Statement
            For the Year Ended June 30,20xx
Revenues.                               
Net sales.                                    $1,197,132
Interest income.                                   5,720
Total Revenues.                          $1,202,852

Costs and expenses
Cost of goods sold.    $777,080
Selling expenses.          203,740
General and
administrativeexpenses 100,688
Interest expense.             13,560
Total costs
and expenses.                               1,095,068
Net income.                                  $107,784
income statement and tell what insights can be obtained from the multistep form as opposed to the single step form.
The following end of the year amounts are from the financial statements of Laliberte Company. Total assets, $852,000,Total liabilities $344,000,Owners equity $508,000,Net sales $1,564,000; Cost of goods sold, $972,000;Operating expenses, $404,000
and Withdrawals, $80,000.During the past year,total assets increased by $150,000.Total owner's equity was affected only by net income and withdrawals.
Compute a.profit margin b.asset turnover
c.return on assets d.debt to equityratoo
e.return on equity

Explanation / Answer

(a) Profit margin = Net income / Sales = $107,784 / $1,197,132 = 0.09, or 9%

(b) Asset turnover = Sales / Average total asset

Beginning total asset = Current year's total asset - $500,000 = $(852,000 - 150,000) = $702,000

Asset turnover = $1,197,132 / [$(852,000 + 702,000) / 2] = $1,197,132 x 2 / $1,554,000 = 1.54

(c) Return on assets = Net income / Average total assets = $107,784 x 2 / $1,554,000 = 0.1387 or 13.87%

(d) Debt/Equity = Total liabilities / Owners' equity = $344,000 / $508,000 = 0.68

(e) Return on equity (ROE) = Net income / Average owner's equity

Last year's net income = Net sales - COGS - Operating expenses = $(1,564,000 - 972,000 - 404,000)

= $188,000

Last year's equity = Current year's equity - Last year's net income = $(508,000 - 188,000) = $320,000

ROE = $107,784 / [$(508,000 + 320,000) / 2] = $107,784 x 2 / $828,000 = 0.2603 Or 26.03%

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