Prepare an income statement from the following: Accounts Receivable $39,120 Inco

Question

Prepare an income statement from the following:

Accounts Receivable             $39,120                           Income Tax              $32,700

Accumulated Depreciation     $60,540                          Prepaid Insurance    $4,680

Administrative Expenses       $90,000                           Note Payable           $77,750

Retained Earnings                 $85,000                           Salaries Payable     $3,060

Cost of Merchandise Sold     $550,000                         Sales (net)                $950,000

Common Stock                     $65,000                           Selling Expenses      $102,000

Interest Revenue                  $10,000                           Supplies                    $3,125

****Please show work; for instance if one of the items on the statement is operating profits, please include which account it includes. For example, Operating profits (Prepaid Insurance) and so forth. I want to make sure that I understand where you are getting the numbers from****

Explanation / Answer

Hi,

Please find the answer as follows:

Sales = 950000

Less Cost of Merchandise Sold = 550000

Gross Profit = 950000 - 550000 = 400000

Less Administrative Expenses = 90000

Salaries Payable = 3060

Selling Expenses = 102000

Supplies = 3125

+ Prepaid Insurance = 4680

Operating Profit = 400000 - 90000 - 3060 -102000 - 3125 + 4680 = 206495

+ Interest Income = 10000

Profit Before Taxes = 216495

Less Taxes = 32700

Profit After Taxes/Net Profit = 173795

Thanks.

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