Question

1-Use the following information to compute NET INCOME. The income tax rate is 40%. Cost of...

1-Use the following information to compute NET INCOME. The income tax rate is 40%.

Cost of Goods Sold                                                               $ 4,000

Interest Expense                                                                        1,100

Selling and Administrative Expense                                      1,750

Sales                                                                                          10,000

Dividends                                                                                       700

a-$1,890

b-$1,260

c-$1,190

d-$1,470

e-$980

2-The data below are for Julian Company and Standard Company. Standard Company is the best company in Julian’s industry; all companies in the industry strive to do things the way that Standard does them.

                                                                    Julian               Standard

Cash                                                                500                      3,250

Accounts Receivable                                5,000                   15,000

Inventory                                                    3,000                   19,500

Property, Plant, and Equipment           12,000                   40,000

Total Assets                                             20,500                   77,750

                                                                                                               

Total Liabilities                                       13,000                   37,000

Total Equity                                               7,500                   40,750

                                                                                                               

                                                                                                               

Sales                                                          40,000                 200,000

Cost of Goods Sold                              (18,000)                 (80,000)

Wage Expense                                      (12,000)                 (60,000)

Research Expense                                  (5,000)                 (25,000)

Advertising Expense                              (1,600)                   (8,000)

Net Income                                                3,400                   27,000

            Which ONE of the following statements is TRUE regarding Julian’s income statement? Remember, Standard Company represents the standard of performance in Julian’s industry.

Julian Company has a problem with its cost of goods sold.

Julian Company has a problem with its advertising expense.

Julian Company’s profitability is better than Standard Company’s profitability.

Julian Company has a problem with its wage expense.

Julian Company has a problem with its research expense
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Answer #1

Answer:-1)-

Calculation of Net income
Particulars Amount
$
Sales 10000
Less:-Cost of goods sold 4000
Gross profit 6000
less:-Selling & Administrative expenses 1750
Earning before interest & tax 4250
Less:- Interest expesnes 1100
Earning before tax 3150
Less:- Tax $3150*40% 1260
Net Income 1890

2)-

Income Statement
Particulars Julian % Standard %
$ $
Sales 40000 100 200000 100
Cost of goods sold -18000 -45 -80000 -40
Wage Expesnes -12000 -30 -60000 -30
Reserach Expesnes -5000 -12.5 -25000 -12.5
Advertising expesnes -1600 -4 -8000 -4
Net Income -3400 -8.5 -27000 -13.5
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