Question

Selected information taken from the financial statements of Fordstar Co. for the year ended December 31, 2016, follows:

Net cash provided by operations	$	42,000
Cost of goods sold		183,400
Selling, general, and administrative expenses		63,000
Accounts payable		50,400
Dividends paid		88,200
Research and development expenses		37,800
Merchandise inventory		61,600
Provision for income taxes		23,800
Net sales		513,800
Interest expense		57,400

Required:

a. Calculate income from operations (operating income) for the year ended December 31, 2016.

b. Calculate net income for the year ended December 31, 2016.

Answer 1

Calculation of Operating Income and Net Income for the Year Ended December 31, 2016

Net Sales Revenue		$513,800
Cost of Goods Sold		$183,400
Gross Profit		$330,400
Operating Expenses:
Selling, General and Administrative expenses	$63,000
Research and Development expenses	$37,800	$100,800
Operating Income		$229,600
Non - Operating Income or Expenses
Interest expense		$57,400
Income before Income tax		$172,200
Provision for Income Tax		$23,800
Net Income		$148,400