Re-organize the scrambled accounts into the income statement for Pet Land Inc., a pet food and...

4.0 Ratings (791 Votes)

*Working Notes :*

1. Calculation of cost of goods sold

Cost of goods sold = Opening Inventory + Purchases - Closing Inventory
Cost of goods sold = 42,500+256,750-33,250
Cost of goods sold = $266,000

2. Sales Revenue or Net sales
Gross Sales = 697,200
Returns = 19,900
Net Sales = 697,200-19,900 = 677,300

Income Statement of Pet Land Inc.
Particulars	(Sub-totals)	Amount ($)
Gross Sales Revenue	6,97,200
Less : Returns	-19,900
Total Revenue	6,77,300	6,77,300
Less : Cost of Goods sold		-2,66,000
Gross Profit		4,11,300
Less : Operating Expenses
Salaries	-1,76,000
Depreciation	-15,000
Cleaning & Maintenance	-5,000
Office Supplies	-2,000
Discounts	-12,300
Fixed Utilities	-2,000
Advertising & Promotion	-25,000
Total Operating Expenses	-2,37,300	-2,37,300
Operating Profit		1,74,000
Less : Non-operating Expenses
Interest Expense		-7,000
Income before tax		1,67,000
Less : Taxes @34%		-56,780
*Net Income*		*1,10,220*

Particulars	Formula	Answer
Gross Margin	Gross Profit/Net Sales	61%	(411,300/677,300)
Operating Margin	Operating Profit/Net Sales	26%	(174,000/677,300)
Income Before Tax	(As per income statement)	1,67,000
Net Income	(As per income statement)	1,10,220

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