The sales revenue on the October 1, 2012-September 30, 2013 income statement for

Question

The sales revenue on the October 1, 2012-September 30, 2013 income statement for Diane’s Thrift Store is as $1,200,000. Cost of goods sold for Diane’s Thrift Store was 30% of sales, operating expenses were 25% of sales, and total interest expense was $10,000.00. Her tax rate is 6%. Diane anticipates that between October 1, 2013 and September 30, 2014, Sales and cost of goods sold will increase 20% and expenses will decrease 10% from the prior year. Because Diane did not incur any additional debt, interest will remain at $10,000 and Diane’s Thrift Store will remain in the 6% tax bracket. What is the anticipated net profit for Diane’s Thrift Store between October 1, 2013 and September 30, 2014?

Explanation / Answer

Income Statement for the period October 1,2013 to September 30,2014:

Sales (1200000 + 20%*1200000) 1440000

Less Cost of goods sold (30%*1200000 + 20%) 432000

Gross Profit 1008000

Less : Operating expenses (25%*1200000 - 10%) 270000

Less : Interest Expense 10000

Profit Before Tax 728000

Less : Tax @ 6% 43680

Anticipated Net Profit 684320

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