Question

1. The following information is available for Shawson Ltd. for calendar 2018 (20 marks): Cost of...

1. The following information is available for Shawson Ltd. for calendar 2018 :

Cost of goods sold                              595,000

Income tax expense                            4,500

Interest expense                                  15,000

Interest revenue                                   19,000

Operating expenses                             97,000

Sales                                                    $725,000

Sales returns and allowances              22,000

Instructions

(a)        Use the above information to prepare a multiple-step income statement for the year ended December 31, 2018.

(b)        Calculate the gross profit margin and the profit margin for 2018.

Business   Accounting   
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Answer #1
Sales $725000
Less: sales return and allowances (22000)
Net sales $703000
Less: cost of goods sold 595000
Gross profit 108000
Less operating expense 97000
Operating profit $11000
Add: interest revenue 19000
Less : interest expense 15000
Less: income tax expense 4500
Net profit $10500

b. Gross margin = gross profit / net sales

= 108000/703000 = 15.36%

Profit margin = 10500/703000 = 1.49%

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