In its income statement for the year ended December 31, 2017, Sandhill Co. repor

ID: 2611679 • Letter: I

Question

In its income statement for the year ended December 31, 2017, Sandhill Co. reported the following condensed data.

Salaries and wages expenses $697,500

Loss on disposal of plant assets $ 125,250

Cost of goods sold 1,480,500

Sales revenue 3,315,000

Interest expense 106,500

Income tax expense 37,500

Interest revenue 97,500

Sales discounts 240,000

Depreciation expense 465,000

Utilities expense 165,000

Prepare a multiple-step income statement.

Calculate the profit margin and gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%.)

Profit Margin ??? %

Gross profit rate ??? %

Calculate the profit margin and gross profit rate. (Round answers to 1 decimal place, e.g. 15.2%.)

Profit Margin ??? %

Gross profit rate ??? %

Explanation / Answer

MULTIPLE-STEP INCOME STATEMENT

SANDHILL CO

Income Statement

For the Year Ended December 31, 2017

Sales Revenue

Sales

$33,15,000

Less : Sales Discount

(240,000)

3,075,000

Less : Cost of goods sold

(14,80,500)

Gross Profit

1,594,500

Operating Expenses

Salaries and Wages

697,500

Depreciation expense

465,000

Utilities Expenses

165,000

Total Operating Expenses

(13,27,500)

Total Operating Income

267,000

Other Income / (Expenses)

Loss on disposal of plant assets

(125,250)

Interest Expenses

(106,500)

Interest Revenue

97,500

Total Other Expenses, Net

(134,250)

Net Income Before Tax

132,750

Less : Income Tax Expenses

(37,500)

Net Income after Tax

95,250

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

= [$95,250 / 30,75,000] x 100

= 3.1%

Gross profit rate = [Gross Profit / Net Sales ] x 100

= [$15,94,500 / 30,75,000] x 100

= 51.9%