E5-8 (Algo) Preparing a Classified (Multiple-Step) Income
Statement and Computing the Gross Profit Percentage LO5-3
need the Administrative expense
Net income
Earnings per share
Homework Answers
According to the requirement of the question, we have to calculate Gross profit percentage, Administrative Expenses, Net Income and Earning Per shares.
Requirement 1. Prepare a complete classified (multiple-step) income statement for the company (Showing both gross profit and Income from Operations).
| TOWNSHIP CORPORATION |
| Income Statement |
| For the Year Ended December 31, Current Year |
| Sales Revenue | $98,000 | |
| Less: Cost of Goods Sold (Working Note) | $(67,000) | |
| Gross profit (Given) | $31,000 | |
| Operating Expenses | ||
| Administrative Expenses (Working Note) | $11,800 | |
| Selling (Distribution) Expense | $6,400 | |
| Total Operating Expense | $(18,200) | |
| Pretax Income | $12,800 | |
| Less : Income Tax Expense ($12,800 * 40%) | $(5,120) | |
| Net Income | $7,680 | |
| Earning Per Share ($7,680 / 2800 Shares) | 2.74 |
Working Note:- Calculation of Cost of Goods sold.
Solution:- Sales - Cost of Goods sold = Gross profit
$98,000 - Cost of Goods sold = $31,000
Cost of Goods sold = $98,000 - $31,000 = $67,000
# Calculation of Administrative Expenses.
Solution :- Gross Profit - Total Operating Expenses = Pretax Income
Gross Profit - Administrative Expense - Selling Expenses = Pretax Income
$31,000 - Administrative Expense - $6,400 = $12,800
Administrative Expense = $31,000 - $6,400 - $12,000 = $11,800
Requirement 2. What is the Gross profit Percentage?
| Gross Profit Percentage (Working Note | 31.63% |
Working Note:- Calculation of Gross profit Percentage.
Gross profit percentage = Gross profit / Sales * 100%
Gross profit percentage = $31,000 / $98,000 * 100%
Gross profit percentage = 31.63%
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