Question

The financial records of Sunland Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows.
1. The beginning merchandise inventory was $75,440 and decreased 20% during the current year.
2. Sales discounts amount to $18,700.
3. 17,108 shares of common stock were outstanding for the entire year.
4. Interest expense was $18,000.
5. The income tax rate is 30%.
6. Cost of goods sold amounts to $440,000.
7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales.
8. Four-fifths of the operating expenses relate to sales activities.

Required:
From the foregoing information prepare an income statement for the year 2020 in single-step form.

Answer 1

Answer:

Sunland Inc.

Income statement for the year 2020

Sales                                                                            $1,100,000

Less Sales Discounts                                                     ($18,700)

Net Sales                                                                     $1,081,300

Less Cost of goods sold                                             ($440,000)

Gross Profit                                                                   $641,300

Less Expenses

Administrative expenses ($440,000 x 20%)             ($88,000)

Interest expense                                                          ($18,000)

Net Profit before tax                                                   $535,300

Income tax expense ($535,300 x 30%)                   ($160,590)

Net Profit after tax                                                        $374,710

Explanation:

The Income Statement shows the Profit earned during the Reporting Period. Only Revenues or Incomes and Expenses are recorded in this Statement.

Using the amount of admin expenses to fin the Gross Sales we have :

Gross Sales = 100 / 8 x $88,000 = $1,100,000