Question

Company X had a beginning inventory of 22 units at December 31, 2016, valued at $811,000. The company had a number of purchases during the new year equal to $352,000. The ending inventory count indicated 60 units valued at $93,100. Assume Sales for the year were $1,105,000 and the tax rate was 22%. Assume General Administration expenses for the year were $61,000. The company had an external gain of 49,000.

Prepare an income statement in good form for the Company X. Assume that there are 350,000 shares outstanding at year-end, 85,000 shares were issued April 15, and 100,000 were issued on September 30. There were 5,000 preferred shareholders who contributed $2,000,000 to earn 8% per year. The $2,000,000 contribution is equal to 30% of total stockholder's equity.

Answer 1

Solution:

Income statement for Company X $ 1,105,000 (1,069,900) 35,100 Sales revenue Cost of Goods sold Gross Profit Operating expense: General Administrative expense Income from Operations Other income & (expense) Net income before tax Income tax @22% Net income (61,000) (25,900) 49,000 23,100 (5,082) 18,018

Here, COGS = Beg. inventory + purchase - Ending inventory

= $811,000 + 352,000 - 93,100 = $1,069,900