Concept explainers
Compute the missing values of the income statement under different cases.
Answer to Problem 5.10E
Preparation of income statement and computation of missing amounts as given below:
Company N | |||||
Statement of Income | |||||
For the year ended | |||||
Particulars | Amount | ||||
Case A | Case B | Case C | Case D | Case E | |
Sales revenue | $800 | $600 | $500 | (12) $1,170 | (14) $760 |
Less: Cost of Goods sold | (1) $425 | ($150) | (9) $280 | $500 | $320 |
Gross margin | $375 | (4) $450 | (8) $220 | (11) $670 | $440 |
Less: Administrative expense | $125 | (5) $100 | $70 | $120 | $80 |
Less: Selling expense | (2) $50 | $50 | $80 | $350 | $240 |
Pretax income | $200 | $300 | (7) $70 | $200 | (13) $120 |
Less: Income tax expense | (3) $50 | $30 | $20 | $50 | $20 |
Net income | $150 | (6) $270 | $50 | (10) $150 | $100 |
Table (1)
Explanation of Solution
Financial statement: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements show the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of
Income statement: Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.
Working Note:
Determine the amount of cost of goods sold.
Determine the amount of selling expense.
Determine the amount of income tax expense.
Determine the amount of gross margin.
Determine the amount of administrative expense.
Determine the amount of net income.
Determine the amount of pretax income.
Determine the amount of gross margin.
Determine the amount of cost of goods sold.
Determine the amount of net income.
Determine the amount of gross margin.
Determine the amount of sales revenue.
Determine the amount of pretax income.
Determine the amount of sales revenue.
Want to see more full solutions like this?
Chapter 5 Solutions
FINANCIAL ACCOUNTING-W/ACCESS >CUSTOM<
- Cost of Goods Sold and Income Statement Schuch Company presents you with the following account balances taken from its December 31 adjusted trial balance: Additional data: 1. A physical count reveals an ending-inventory of 22,500 on December 31. 2. Twenty-five thousand shares of common stock have been outstanding the entire year. 3. The income tax rate is 30% on all items of income. Required: 1. As a supporting document for Requirements 2 and 3, prepare a separate schedule for Schuchs cost of goods sold. 2. Prepare a multiple-step income statement. 3. Prepare a single-step income statement.arrow_forwardAnalyzing Inventory The recent financial statements of McLelland Clothing Inc. include the following data: Required: 1. Calculate McLellands gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the FIFO inventory costing method. Be sure to explain what each ratio means. 2. Calculate McLellands gross profit ratio (rounded to two decimal places), inventory turnover ratio (rounded to three decimal places), and the average days to sell inventory (assume a 365-day year and round to two decimal places) using the LIFO inventory costing method. Be sure to explain what each ratio means. 3. CONCEPTUAL CONNECTION Which ratios-the ones computed using FIFO or LIFO inventory values-provide the better indicator of how successful McLelland was at managing and controlling its inventory?arrow_forwardInventory Analysis Callahan Company reported the following information for the current year. Required: 1. Compute Callahans (a) gross profit ratio, (b) inventory turnover ratio, and (c) average days to sell inventory. (Round all answers to two decimal places.) 2. Explain the meaning of each number.arrow_forward
- The following selected information is taken from the financial statements of Arnn Company for its most recent year of operations: During the year, Arnn had net sales of 2.45 million. The cost of goods sold was 1.3 million. Required: Note: Round all answers to two decimal places. 1. Compute the current ratio. 2. Compute the quick or acid-test ratio. 3. Compute the accounts receivable turnover ratio. 4. Compute the accounts receivable turnover in days. 5. Compute the inventory turnover ratio. 6. Compute the inventory turnover in days.arrow_forwardMultiple-step income statement The following income statement for Curbstone Company was prepared for the year ended August 31, 20Y5: a. Identify the errors in the income statement. b. Prepare a corrected income statement.arrow_forwardInventory Analysis Singleton Inc. reported the following information for the current year: Required: Compute Singletons (a) gross profit ratio, (b) inventory turnover ratio, and (c) average days to sell inventory. (Note: Round all answers to two decimal places.)arrow_forward
- Assuming a companys year-end inventory were understated by $16,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equityarrow_forwardAssuming a companys year-end inventory were overstated by $5,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equityarrow_forwardJasmine Company provided the following income statements for its first 3 years of operation: Refer to the information for Jasmine Company above. Required: Prepare common-size income statements by using net sales as the base. (Note: Round answers to the nearest whole percentage.)arrow_forward
- Last year, Nikkola Company had net sales of 2,299,500,000 and cost of goods sold of 1,755,000,000. Nikkola had the following balances: Refer to the information for Nikkola Company above. Required: Note: Round answers to one decimal place. 1. Calculate the average inventory. 2. Calculate the inventory turnover ratio. 3. Calculate the inventory turnover in days. 4. CONCEPTUAL CONNECTION Based on these ratios, does Nikkola appear to be performing well or poorly?arrow_forwardComparability and Consistency in Income Statements The following income statements were provided by Chisholm Company, a wholesale food distributor: Required Identify each income statement as either single- or multiple-step format. Restate each item in the income statements as a percentage of sales. Why did net income remain unchanged when sales increased in 2016?arrow_forwardThe following select account data is taken from the records of Reese Industries for 2019. A. Use the data provided to compute net sales for 2019. B. Prepare a simple income statement for the year ended December 31, 2019. C. Compute the gross margin for 2019. D. Prepare a multi-step income statement for the year ended December 31, 2019.arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
- College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub