Question

Presented below is information for Lieu Co. for the month of January 2017. Cost of goods sold $212,000 Rent expense $32,000 Freight-out 7,000 Sales discounts 8,000 Insurance expense 12,000 Sales returns and allowances 20,000 Salaries and wages expense 60,000 Sales revenue 370,000 Income tax expense 5,000 Other comprehensive income (net of $400 tax) 2,000 Prepare an income statement using the multi-step format. LIEU Co. Income Statement Sales Revenue $ 370000 : Sales Returns and Allowances $ 20000 Sales Discounts 8000 28000 342000 Cost of Goods Sold 212000 130000 Salaries and Wages Expense 60000 Rent Expense 32000 Insurance Expense 12000 Freight-Out 7000 111000 19000 Income Tax Expense 5000 $ 14000 SHOW LIST OF ACCOUNTS Prepare a comprehensive income statement. LIEU Co. Comprehensive Income Statement $ $ SHOW LIST OF ACCOUNTS Calculate the profit margin and the gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%.) Profit margin % Gross profit rate %

Answer 1

Lieu Co.
Income Statement
Sales revenue		$370,000
Less: Freight out	7,000
Less: Sales Discount	8,000
Less: Sales return and allowances	20,000	35,000
Net Sales		335,000
Less: Cost of goods sold		212,000
Gross Profit		123,000
Operating Expenses
Rent Expense	32,000
Insurance expense	12,000
Salary and wages expense	60,000	104,000
Earning Before tax		19,000
Less: Income Tax Expenses at 25% [25% = {($400/1,600)}x 100]		4,750
Net Income		14,250

Profit Margin

Profit Margin = [Net Income / Net Sales]x 100

= [$14,250 / 335,000] x100

= 4.3%

Gross Profit Margin

Gross Profit Margin = [Gross Profit / Net Sales] x 100

= [$123,000 / 335,000] x 100

= 36.7%