Question

Stein Books Inc. sold 2,000 finance textbooks for $210 each to High Tuition University in 20X1. These books cost $180 to produce. Stein Books spent $12,900 (selling expense) to convince the university to buy its books.

Depreciation expense for the year was $15,800. In addition, Stein Books borrowed $102,000 on January 1, 20X1, on which the company paid 16 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm’s tax rate is 30 percent.

Prepare an income statement for Stein Books.
  

Answer 1

Solution:

Income Statement
Sales (2,000 * $210)	420,000
COGS (2,000 * $180)	360,000
Gross profit	60,000
Selling expenses	12,900
Depreciation expense	15,800
Operating profit	31,300
Interest expense (102,000 * 0.16)	16,320
Earning before taxes	14,980
Taxes (30% * 14,980)	4,494
Earning after taxes	10,486