Question

Q3: Hebron CO. provided the following partial-trial balance for the current year. Prepare a multi-step income statement for the year ended December \(31 .\) Hebron is subject to a \(20^{\circ} \%\) income \(\operatorname{tax}\) rate.

Answer 1

Step 1 INCOME STATEMENT FOR HEBRON CO

	Amount($)
Sales	$    225,400
Less - COGS	$    90,100
Gross Profit	$   135,300
Operating Expenses
Selling Expenses:
Advertisement Expenses	$     6,660
Sales salaries expenses	$     8,390
Other selling expenses	$    11,210
Admin Expenses:
Office Supplies Expenses	$       4,500
Accounting & Legal Expenses	$       2,400
Office Salaries	$      21,480
Total operating expenses	$     54,640
Operating Income (105,300 -54,640)	$   80,660
Other Revenues & Expense:
Dividend Income	$       3,830
Interest Income	$       1,450
Gain on disposal of assets	$       14,810
Unrealised Gain from trading	$       7,270
Depreciation Expense	$     (18,600)
Loss on asset impairment	$     (1,840)
Net Non-Operating expenses	$ (6,920)
Net Profit before Interest and taxes ($80,660+$6,920)	$  87,580
Less - interest Expense	$ 2,570
Net Profit Before tax	$ 85,010
Income Tax ( see Note)	$ 17,002
Net Profit after Tax	$ 68,008
Less - Dividend	$ 2,460
Retained Earnings	$65,548

 

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Step 2 Computation of income tax

Income tax = 20 % of Net profit before tax

                  = 20 % of $85,010

                  = $17,002