In this module, you were introduced to the income statement and profitability ra

Question

In this module, you were introduced to the income statement and profitability ratios. In this assignment, you will use this information to create an income statement and then analyze it for profitability. Selected accounts for Jackson, Inc. are listed below along with their balances before closing the year of 12/31/12. Jackson, Inc. is a firm that manufactures wireless mouse systems for laptops. Use this information to complete the required elements below.

The current syllabus cites a previous edition of the textbook. The attached update is correct for Winter and Springall current and upcoming terms.

1Dividends were declared and paid to Jackson, Inc. stockholders

Required:

The following links provide sample formatting for income statements and statements of retained earnings.

Submit your spreadsheet to the Week 3 Assignments page. Ensure your work is accurate and reflects CSU-Global writing expectations.

Interest expense $ 2,000 Sales revenue 297,000 Selling expenses 38,200 Administrative expenses 16,700 Cost of goods sold 162,300 Dividends1 12,200 Gain on sale of equipment 3,600 Loss from fire 7,500 Retained Earnings (1/1/12 balance) 335,000 Tax expense 22,800

Explanation / Answer

1 Jackson, Inc Multiple Step Income Statement for the year ended December 31, 2012 Sales 297000 Cost of goods sold -162300 Gross profit 134700 Operating expenses: Selling -38200 Administrative -16700 Total operating expenses -54900 Income from operations 79800 Other revenue and (expense): Interest expense -2000 Gain on Sale of Equipment 3600 Infrequent or unusual losses -7500 Total other revenue and expense -5900 Income before income taxes 73900 Income taxes -22800 Net Income 51100 2 Jackson, Inc Statement of Retained Earnings for the year ended December 31, 2012 Balance on 1/1/12 335000 add net income 51100 less dividend -12200 Balance on 12/31/12 373900 3 Ratios Working 2012 2011 2010 Competitor Gross Profit Margin 134700/297000 45.35% 47.22% 48.87% 43.22% Operating Income Margin 79800/297000 26.87% 26.52% 25.43% 31.20% Net Profit Margin 51100/297000 17.21% 17.75% 17.03% 21.14% 4 The above analysis shows that the gross profit margin has gone down in 2012 as compared to previous years but still better than competitor's gross profit margin. It means that the cost of goods sold was higher in current year, but it was lower than the competitor. The increase in operating margin in 2012 was slightly higher than 2011, but still lower than competitor. It shows that company has controlled the operating expenses in current year, but still on higher side as compared to competitor. The trend of net profit margin is not certain, it went up in 2011, but then in 2012, it went down and still lower than competitor's net profit margin, it is due to loss on fire in the current year, otherwise it would be on better side.

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