Question

Category	Prior year	Current year
Accounts payable	41,400	45,000
Accounts receivable	115,200	122,400
Accruals	16,200	13,500
Additional paid in capital	200,000	216,660
Cash	???	???
Common Stock @ par value	37,600	42,000
COGS	131,400	171,328.00
Depreciation expense	21,600	23,858.00
Interest expense	16,200	16,911.00
Inventories	111,600	115,200
Long-term debt	135,000	137,826.00
Net fixed assets	375,421.00	399,600
Notes payable	59,400	64,800
Operating expenses (excl. depr.)	50,400	60,690.00
Retained earnings	122,400	136,800
Sales	255,600	337,713.00
Taxes	9,900	18,866.00

1. What is the firm's net income for the current year? (explain how you found net income please)

2. What is the firm's current year net profit margin?

3. What is the firm's gross profit margin for the current year?

4. What is the firm's current year operating profit margin?

5. What is the entry for the current year's cost of goods sold on a common-sized income statement?

Please explain each question on what is being used and how you found them because I am really lost, thank you !

Answer 1

For the Question No. 1

TRADING AND PROFIT & LOSS A/C AS OF CURRENT YEAR
PARTICULARS	AMOUNT		PARTICULARS	AMOUNT
TO INVENTORIES	1,11,600.00		BY SALES	3,37,713.00
TO COGS	1,71,328.00		BY INVENTORIES	1,15,200.00
TO GROSS PROFIT	1,69,985.00
	4,52,913.00			4,52,913.00
TO OPERATING EXPENSES	60,690.00		BY GROSS PROFIT	1,69,985.00
TO DEPRECIATION EXPENSES	23,858.00
TO INTEREST EXPENSES	16,911.00
TO NET INCOME	68,526.00
TOTAL	33 1,69,985.00		TOTAL	1,69,985.00

As you can see that Net Income is being calculated first we added all the sales and the inventories of right side then we minus it with the COGS and inventories at the starting of the year and then we also less the Operating expenes and then the Depriciation Expenses and Interest Expenses and then we got our Net Income.

For the Question No. 2

Net Income and Net Profit are both same things.

As Net Profit Margin is being calculated as =Net Profit/Sales*100

= 68526/337713*100=20.29%

Hence, Net Profit Margin is 20.29%

For the Question No. 3

Gross Profit Margin is being calculated as =Sales-COGS/Sales

=337713-171328/337713*100

=166385/337713*100=49.26%

Hence Gross Profit Margin is 49.26%

For the Question No. 4

Operating Profit Margin is being Calculated= Sales-(COGS+All General Expenes and Administrative Expenses)/Sales*100

=337713-(171328+60690+23858+16911)/337713*100

=337713-272787/337713*100=19.22%

Hence Gross Profit Margin is 19.22%

For the Question No.5

It will be shown as below in the Common Income Statement .

TRADING AND PROFIT & LOSS A/C AS Of CURRENT YEAR
PARTICULARS	AMOUNT		PARTICULARS	AMOUNT
TO INVENTORIES	1,11,600.00		BY SALES	3,37,713.00
TO COGS	1,71,328.00		BY INVENTORIES	1,15,200.00

And the Entry for the same will be

To Cost of Goods Sold………… $500

By Mr. XYZ(Account Payable)…….$ 500