Question

2 1. Construct an income statement using the following information- 3 a. Enter the account names & amounts into the correct cells 4 b. Calculate the Net Income. 5 Interest Expense = $10,000 6 Cost of Goods Sold = $160,000 7 Marketing Expenses = $70,000 8 Administrative Expenses = $50,000 9 Sales = $400,000 10 Income Tax = $20,000 11 Depreciation Expense = $20,000 12 13 14 Finch Company 15 Income Statement 16 Amounts 17 Revenues/Sales 18 Less: Cost of Goods Sold 19 Operating Income(you calculate) 20 Less: Expense 1 21 Less: Expense 2 22 Less: Expense 3 23 Less: Expense 4 24 Net Income before taxes(you calculate) 25 Less: taxes 26 Net Income (you calculate) 27

Answer 1

1. a) and b)

Finch Co.

Income Statement

Sales		$400000
Less : Cost of Goods Sold		$(160000)
Gross Margin		$240000
Other Operating Expenses
Less : Depreciation		$(20000)
Less:Marketing Expenses		$(70000)
Less :Marketing Expenses		$(50000)
Net Operating Income		$100000
Less: Interest Expenses		$(10000)
Net Income before tax		$90000
Less : Tax Expense		$(20000)
Net Income after Tax		$70000

Under Income statement first we calculate gross margin which is Net sales - Cost of Goods sold .

Then from Gross Margin Other Expenses Relating to selling adminstrationa , depreciation etc are deducted which gives net operating income from which interest expenses will be deducted to give Net income before tax.

On Income before taxes (EBT) , Tax is deducted to give net income after tax.