Question

Extracts from the financial statements of ABC Ltd and additional information are provided below. Income statement for the year ended 31 March 2017 $000 800 Credit sales revenue Cost of sale (600) Gross profit 200 Selling expenses (80) Distribution costs (20) Other expenses (20) Profit before taxation 80 Taxation (25%) (20) Profit for the year 60 Additional information 1. Credit sales revenues are expected to increase by 10% in the year to 31 March 2018. 2. The tax rate for the year ended 31 March 2018 will be 35%. Use the information above and per-cent of sales method to prepare a projected income statement for the year ended 31/3/2018

Answer 1

Percent of Sales method 25"/ projected income statement for the year ended 31/03/2018 ro credit sales revenue 880 110-1 cost of sale (660) Gross profit 200 Selling expenses (88) 101 Distribution costs (22) 2.5% other expenses (20) Profit before taration 90 Taxation (35%) (31.5) profit for the year 58.5 Assumption: - 1 It is assumed that other expenses doce not commensurate increase along with sales. It is assumed other expenses are fined irrespective increase in % of saus. 2) All other expenses increase along with Sales and expressed as percentage of sales