2. (TCOs B & E) The Caltor Company gathered the following condensed data for the

Question

2. (TCOs B & E) The Caltor Company gathered the following condensed data for the year ended December 31, 2010: Cost of goods sold $ 710,000 Net sales 1,279,000 Administrative expenses 239,000 Interest expense 68,000 Dividends paid 38,000 Selling expenses 45,000 Instructions: Prepare a multiple-step income statement for the year ended December 31, 2010. Compute the profit margin ratio and gross profit rate. Caltor Company s assets at the beginning of the year were $770,000 and were $830,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations and explain your findings.

Explanation / Answer

Revenues Net sales

Cost of Goods Sold  $ 710,000

Gross Profit Expenses:

Selling expenses

Administrative expenses

Interest expenss

Total expenses

Net income

$1,279,000 710,000 $569,000 45,000 239,000 68,000 $352,000 $217,000

2. Profit margin ratio: $217,000 / $1,279,000 = 16.9%

Gross profit rate: $569,000 / $1,279,000 = 44.49%

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