The following are selected account balances for Charte All balances are normal):

ID: 2572224 • Letter: T

Question

The following are selected account balances for Charte All balances are normal): Company's operations for the FY ended December 31,2016 Accounts Amount Net Sales 225,500 22,000 12,000 175,250 Adminlstrative Expenses Selling Expenses Cost of Goods Sold 2,000 Interest Expense Income Tax Expense Prepald Expenses Interest Recetvable 1,000 $5,000 $1,000 What Is the Net Profit on Sales ratio for the year 20162 (Enter the value as a percentage rounded to one decimal place Example, 0.105134 would be entered as 10.5%)

Explanation / Answer

Solution:

Calculation of Net Profit

Net Sales

$225,500

Expenses:

Cost of Goods Sold

$175,250

Administrative Expenses

$22,000

Selling Expenses

$12,000

Interest Expense

$2,000

Income Tax Expense

$1,000

Total Expense

$212,250

Net Income

$13,250

Note – Prepaid Expenses and Interest Receivable is not the items of Profit and Loss Account. It is shown in the balance sheet.

Net Profit on Sales Ratio for the year 2016 = Net Profit / Sales x 100 = 13,250 / 225,500 x 100 = 5.876% or 5.9%

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