Question

Blink, Ltd. Had the following data:

• Sales of $550,000

• Administrative Expenses of $45,000

• Beginning Inventory of $100,000

• A/P has a balance of $55,000.

• An accounting change was made that resulted in a gross loss of $80,000.

• Treasury stock was purchased for $15,000

• Selling expenses of $60,000

• Interest expense of $10,000 was paid.

• Purchases of $300,000

• Tax rate is 50%

• A routine monthly event occurred (the selling of some waste product) that gave the company $5,000 in income. This was not a normal operating item but was done every month.

• Ending Inventory of $125,000

• There were 300,000 shares; 200,000 of common and 100,000 of preferred.

Prepare an Income Statement

Answer 1

Income Statement
Particulars	Amount	Particulars	Amount
To Opening Stock	100000	By Sales	550000
To Purchases	300000	By Closing Stock	125000
To Operating Profit	275000
Total	675000	Total	675000
To Selling Expenses	60000	By Operating Profit	275000
To Interest Expenses	10000	By Sale of Waste Material	5000
To Loss due to change in Accounting Policy	80000
To Tax Expense	105000
To Net Profit	25000
Total	280000	Total	280000

Calculation of Tax Expense
Particulars	Amount
Income as per P&L before Tax	130000
Add: Notional Loss due to change in accounting policy	80000
Income for Tax Purpose	210000
Income Tax @50 %	105000

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