Question

Below are accounts from statement of financial position and Income statement dated on December 31, 2020 for Ben’s Inc., a merchandising business.

All amounts are expressed in Canadian dollars and report normal balance.

Account	Balance
Accounts payable	$ 4,360
Accounts receivable	$ 200
Advertising expense	$ 3,200
Bank loan payable	$ 8,000
Building (net value)	$ 26,100
Cash	$ 34,000
Common shares	$ 16,000
Cost of goods sold	$ 92,000
Depreciation expense, Building	$ 4,400
Income tax payable	To determine
Interest expense	$ 600
Inventory	$ 10,800
Land	$ 16,000
Prepaid rent	$ 9,200
Rent expense	$ 1,000
Retained earnings (opening balance January 1, 2020)	$ 46,020
Sales revenue	$ 168,000
Supplies	$ 400
Supplies expense	$ 200
Unearned revenue	$ 2,400
Wages expense	$ 18,000

1- Calculate Gross profit

2- Operating expenses

3- Operating income (profit from operations)

4- Other revenues and expenses

5- Income before income tax

6- income tax expense (30% tax)

7- Net income

Answer 1

All amounts are in $

Income Statement

Particulars	Amount	Amount
Sales		168,000
Cost of goods sold		(92,000)
Gross Profit		76,000
Operating Expense
Depreciation Expense	4,400
Rent Expense	1,000
Supplies Expense	200
Advertising Expense	3,200
Wages Expense	18,000	(26,800)
Non Operating Expense
Interest Expense		(600)
Profit before tax		48,600
Income tax (48,600 x 30%)		(14,580)
Income After Tax or Net Income		34,020

1. Gross Profit = 76,000

2. Operating Expense = 26,800

3. Operating Income = Gross Profit - Operating Expense

= 76,000 - 26,800

= 49,200

4. Other Revenues & Expense

= Non Operating Expense

= Interest Expense

= (600)

5. Income before Income tax = 48,600

6. Income tax expense = 14,580

7. Net Income = 34,020