Question

1. The following information is available for Shawson Ltd. for calendar 2018 (20 marks):

Cost of goods sold                              595,000

Income tax expense                            4,500

Interest expense                                  15,000

Interest revenue                                   19,000

Operating expenses                             97,000

Sales                                                    $725,000

Sales returns and allowances              22,000

Instructions

(a)        Use the above information to prepare a multiple-step income statement for the year ended December 31, 2018. (15 marks)

(b)        Calculate the gross profit margin and the profit margin for 2018. (5 marks)

Answer 1

		multi step income statement
	Sales				725,000
	less:Sales return and allowances				22,000
	Net sales					703,000
	Cost of goods sold					595,000
	Gross profit					108,000
	operating expenses					97,000
	operating income					11,000
	other revenue and expenses
	interest revenue				19,000
	interest expense				15,000	4,000
	income before tax					15,000
	income tax					4,500
	net income					10,500
b)	gross profit margin
	108000/703000
	15.36%
	profit margin
	10,500/703000
	1.5%