Question

The following percentages apply to Campbell Company for Year 3 and Year 4: Year 4 Year...

The following percentages apply to Campbell Company for Year 3 and Year 4:

Year 4 Year 3
Sales 100.0 % 100.0 %
Cost of goods sold 60.9 64.0
Gross margin 39.1 36.0
Selling and administrative expense 26.4 20.6
Interest expense 2.6 2.2
Total expenses 29.0 22.8
Income before taxes 10.1 13.2
Income tax expense 5.7 7.0
Net income 4.4 % 6.2 %


Required
Assuming that sales were $515,000 in Year 3 and $585,000 in Year 4, prepare income statements for the two years.

Business   Accounting   
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Answer #1
year 4 year 3
sales (585,000*100%) (515,000*100%) 585,000 515,000
cost of goods sold (585,000*60.9%) (515,000*64.0%) 356,265 329,600
gross margin (585,000*39.1%) (515,000*36.0%) 228,735 185,400
selling and administrative expense (585,000*26.4% (515,000*20.6%) 154,440 106,090
Interest expense (585,000*2.6%) (515,000*2.2%) 15,210 11,330
total expenses (585,000*29%)(515,000*22.8%) 169,650 117,420
income before taxes (585,000*10.1%) (515,000*13.2%) 59,085 67,980
income tax expense (585,000*5.7%) (515,000*7.0%) 33,345 36,050
net income (585,000*4.4%) (515,000*6.2%) 25,740 31,930
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