Question

Exercise 5-12 In 2017, Matt Cruz Company had net sales of $931,100 and cost of goods sold of $559,300. Operating expenses were $223,500, and interest expense was $14,700. Cruz prepares a multiple-step income statement. Compute Cruz’s gross profit. Gross profit $ LINK TO TEXT Compute the gross profit rate. (Round answer to 1 decimal place, e.g. 25.2%.) Gross profit rate % LINK TO TEXT What is Cruz’s income from operations and net income? Income from operations $ Net income $ LINK TO TEXT If Cruz prepared a single-step income statement, what amount would it report for net income? Net income in Cruz’s single-step income statement $ LINK TO TEXT In what section of its classified balance sheet should Cruz report inventory? Inventory is reported as a immediately below .

Answer 1

1. Gross Profit:

Gross Profit = Sales - Cost of Goods Sold

Gross Profit = $ 931,100 - $ 559,300

Gross Profit = $ 371,800

2. Gross Profit Rate:

Gross Profit Rate = Gross Profit / Sales x 100

Gross Profit Rate = $ 371,800/$ 931,100 x 100 = 39.9%

3. Income from Operations and Net Income:

Income from operations = Gross Profit - Operating expenses

Income from operations = $ 371,800 - $ 223,500

Income from operations = $ 148,300

Net Income = Income from Operations - Non Operating Expenses

Net Income = $ 148,300 - $ 14,700

Net Income = $ 133,600.

4. If it prepares a single-step income statement, Net income reported by the company would be $ 133,600.

5. Inventory would be reported in Current Assets in the classified balance sheet of the company; It would be reported immediately below the Accounts Receivable.

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