Question

use the following ratio data to coplete old mill's income statement.

1. Inventory turnover was 3.70 (beginning merchandise inventory was $810; ending merchandise inventory was $770).

2. profit margin ratio is 14%

Old Mills Income Statement Year Ended December 31, 2018

Net sales revenue $6,900, cost of goods sold_________, selling and administrative expensed 1,710, interest expense____________, other expenses 120, income before income taxes 1,150, income tax expense_____________, net income_____________.

Answer 1

Solution:

Inventory turnover = 3.70

Cost of goods sold / Average inventory = 3.70

Average inventory = ($810 + $770) / 2 = $790

Cost of goods sold = 3.70 * $790 = $2,923

Net Sales = $6,900

Profit margin ratio = 14%

Net Income = $6,900 * 14% = $966

Income statement - Old Mills Company
For year ended Dec 31, 2018
Particulars	Amount
Net Sales revenue	$6,900.00
Cost of goods sold	$2,923.00
Gross Profit	$3,977.00
Selling and administrative expenses	$1,710.00
Interest expense	$997.00
Other expense	$120.00
Income before income taxes	$1,150.00
Income tax expense	$184.00
Net Income	$966.00