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
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.
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
|Calculation of Net income|
|Less:-Cost of goods sold||4000|
|less:-Selling & Administrative expenses||1750|
|Earning before interest & tax||4250|
|Less:- Interest expesnes||1100|
|Earning before tax||3150|
|Cost of goods sold||-18000||-45||-80000||-40|
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