Question

Suppose in its income statement for the year ended June 30, 2017, The Clorox Company reported the following condensed data (dollars in millions). Salaries and wages expenses $ 480 Research and development expense $ 130 Depreciation expense 75 Income tax expense 339 Sales revenue 5,515 Loss on disposal of plant assets 45 Interest expense 150 Cost of goods sold 2,618 Advertising expense 550 Rent expense 120 Sales returns and allowances 280 Utilities expense 70 Assume a tax rate of 34%.

Using the data, assume the marketing department has presented a plan to increase advertising expenses by $387 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%.

Prepare a multiple-step income statement. (Round answers to 0 decimal places, e.g. 15,222.)

Answer 1

Using the data, assume the marketing department has presented a plan to increase advertising expenses by $387 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%.

Clorox Company Income statement for the year ended June 30 2017
Sales [5515(1+.25) = 6893.75]	6894 rounded
less:sales return and allowance [280 (1+.25)]	(350)
Net sales		6544
less:cost of goods sold [2618(1+.25)= 3272.5]		(3273) rounded
Gross profit		3271
less:Operating expense
salaries and wage expense	480
Research and development expense	130
Depreciation expense	75
Advertising expense [550+387]	937
Rent expense	120
utilities expense	70
Total operating expense		(1812)
Operating income		1459
Other Income /(expense)
Loss on disposal of plant asset	(45)
Interest expense	(150)
Total other revenue/(expense)		(195)
Income before tax		1264
less:Income tax expense (1264*34%= 429.76)		(430) rounded
Net income		834