The following information was developed from the financial statements of Donelso
ID: 2567915 • Letter: T
Question
The following information was developed from the financial statements of Donelson, Inc. At the beginning of 2018, the company's former supplier went bankrupt, and the company began buying merchandise from another supplier.
Required:
a. Compute the net sales for each year.
b. Compute the cost of goods sold in dollars and as a percentage of net sales for each year.
c. Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes expense is not an operating expense.)
d. Prepare a condensed comparative income statement for 2017 and 2018. Include the following items: net sales, cost of goods sold, gross profit, operating expenses, income before income tax, income taxes expense, and net income. Omit earnings per share statistics.
2018 2017 Gross profit on sales $ 1,008,000 $ 1,134,000 Income before income tax 230,400 252,000 Net income 172,800 189,000 Net income as a percentage of net sales 6.0 % 7.5 %Explanation / Answer
1 Net sales: 2018 2880000 =172800/6% 2017 2520000 =189000/7.5% 2 Cost of goods sold in dollars: 2018 1872000 =2880000-1008000 2017 1386000 =2520000-1134000 Cost of goods sold as a percentage: 2018 65% =1872000/2880000 2017 55% =1386000/2520000 3 Operating expenses in dollars: 2018 777600 =1008000-230400 2017 882000 =1134000-252000 Operating expenses as a percentage: 2018 27% =777600/2880000 2017 35% =882000/2520000 4 2017 2018 Net sales 2520000 2880000 cost of goods sold 1386000 1872000 Gross profit 1134000 1008000 Operating expenses 882000 777600 Income before income tax 252000 230400 Income taxes expense 63000 57600 Net income 189000 172800
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