Question

Berg, Inc. provides exotic wedding planning services. Berg’s facilities are located in an elevated area with a dry climate. Assume all amounts are pre-tax and a 21% tax rate for the year.

Interest expense	$	30,000
Cost of goods sold		900,000
Flood damage to facilities		60,000
Revenue		2,100,000
Office salaries expense		150,000
Advertising expense		180,000
Rent expense		100,000
Restructuring charges		80,000

Required:

Based on the available information, provide a multiple-step income statement for Berg, Inc. for the year ended December 31. Indicate all negative numbers using parentheses, and include all subtotals, appropriately labeled, to present your income statement in good form.

Answer 1

The income statement is presented as follows:

Income Statement for the year ended December 31
Particulars	Amount
Revenue	$ 2,100,000
Cost of goods sold	$ 900,000
Gross Profit	$ 1,200,000
Office Salaries	$ 150,000
Advertising expense	$ 180,000
Rent expense	$ 100,000
Total Operating Expenses	$ 430,000
Operating Income	$ 770,000
Interest expense	$ 30,000
Flood damage to facilities	$ 60,000
Restructuring charges	$ 80,000
Total Non operating expenses	$ 170,000
Profit before tax	$ 600,000
Less: Tax @ 21%	$ 126,000
Profit after tax	$ 474,000

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