Income Statement
The goal of a business is to make a profit. Financial statementssuch as income statements and balance sheets report how successfula business has been in achieving this goal.
1. Use spreadsheetsoftware to create an income statement for Sweet Treats using thedata shown below step 8. Format the income statement similar to theone shown in Figure 1-2.2. Use appropriate number formats and rulesunder numbers as shown in Figure 1-2.2.
2. Enter theappropriate headings and date the income statement for the yearended December 31 of the current year.
3. Enter a formulato subtract the cost of goods sold from sales to find the grossprofit on sales.
4. Enter a formulato subtract the total operating expenses from the gross profit onsales to find the net income from operations.
5. Enter a formulato subtract other expenses or add other income to find net incomebefore income tax.
6. Enter a formulato subtract income tax to find net income after income tax.
7. Enter formulas tocalculate the percentage of sales for gross profit on sales, netincome from operations, net income before tax, and net income aftertax. (Divide each number by sales.)
8. One goal of SweetTreats is to have net income that is 25 percent of sales or higher.Assuming the company sells the same amount of merchandise andexpenses and taxes remain the same, how much would the company haveto increase prices to meet this goal?
Data for an income statement for the year ended December 31 ofthe current year:
Sales $325,000
Cost of GoodsSold 175,000
Operating Expenses
AdvertisingExpense 1,000
DeliveryExpense 2,000
Office Supplies Expense 500
Payroll TaxesExpense 5,000
SalariesExpense 58,000
UtilitiesExpense 3,000
MiscellaneousExpense 400
Other Expense
Interest 2,500
IncomeTax 11,500
