Question

Reading Readiness, Inc. has provided you its list of accounts and balances as of January 31. The Controller has asked you to prepare an Income Statement for the month ended January 31. Use the information included in the Excel Simulation and the Excel functions described below to complete the task.

Answer 1

The preparation of Reading Readiness, Inc.'s multi-step Income Statement for the month ended January 31 is as follows:

Reading Readiness, Inc.

Income Statement

For the month ended January 31

Sales Revenue              $175,500

Less:

Sales Returns                      4,700

Sales Discounts                  6,000

Net Sales                     $164,800

Cost of Goods Sold         67,700

Gross profit                    $97,100

Expenses:

Salaries and Wages     $25,900

Depreciation Expense    13,800

Rent Expense                24,000

Operating expenses   $63,700

Operating income     $33,400

Interest Expense              1,600

Income before tax     $31,800

Income tax expense       7,700

Net income                 $24,100

Data and Calculation:

Gross profit percentage = 59% ($97,100/$164,800 x 100)

Thus, the net income after deducting the income tax expense is $24,100.

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