Question

ABC Company has the following information available on December 31, 2017. The tax rate is 25% $6,000 Sales Salaries $240,000 $16,000 Cash $200,000 Sales Revenue $3,000,000 $60,000 Interest Expense Interest Revenue Administrative Salaries Depreciation (40% selling: 60% administrative Cost of Goods Sold Sales Returns & Allowances Loss on Sale of South American Division Gain on Sale of Equipment $200,000 Dividends Paid $48,000 $1,700,000 ales $30,000 $70,000 $84,000 $50,000 Discounts

1. What is the amount of Net Sales that ABC would report on its Income Statement?

$3,000,000

$2,920,000

$3,200,000

$2,970,000

2. What is the amount of Gross Profit that ABC would report on its Income Statement?

$1,300,000

$1,220,000

$1,500,000

$1,270,000

3. What is the TOTAL amount of Operating Expenses that ABC would report on its Income Statement?

$506,000

$500,000

$554,000

$440,000

Answer 1

1)	$ 2,920,000
Working:
Sales Revenue					$       30,00,000
Less:	Sales discount			$       50,000
	Sales Returns and Allownces			$       30,000	$             80,000
Net Sales					$       29,20,000
2)	$1,220,000
Working:
Net Sales					$       29,20,000
Less:Cost of goods sold					17,00,000
Gross Profit					$       12,20,000
3)	$500,000
Working:
Administrative Salaries					$          2,00,000
Depreciation					$             60,000
Sales Salaries					$          2,40,000
Operating expenses					$          5,00,000

Operating expenses are those expenses which are incurred for carrying out the actiivties for which a company is formed.