Connect Access Card For Financial Accounting
Connect Access Card For Financial Accounting
10th Edition
ISBN: 9781260481297
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 5, Problem 11E
To determine

Compute the missing values of the income statement under different cases.

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Answer to Problem 11E

Preparation of income statement of Company BGT and computation of missing amounts as given below:

Company BGT
Statement of Income
For the year ended
ParticularsCase ACase BCase CCase DCase E
Sales revenue$770(4) $1,200(7) $400$600$1,050
Less: Cost of Goods sold(3) $300$320$125$250(12) $420
Gross margin(2) $470$880(6) $275(9) $350$630
Less: Administrative expense$200$120$80(10) $150$175
Less: Selling expense$90$275$45$70(13)$85
Pretax income(1) $180(5) $485$150$130$370
Less: Income tax expense$65$210$60$45(14) $130
Net income$115$275(8) $90(11) $85$240

Table (1)

Explanation of Solution

Financial statement: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements show the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Income statement: Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.

Working Note:

Determine the amount of pretax income.

Pretax income=Net income after tax+Income tax expense=$115+$65=$180 (1)

Determine the amount of gross margin.

Gross margin= Pretax income+Selling expense+Administrative expense=$180(1)+$90+$200=$470 (2)

Determine the amount of cost of goods sold.

Cost of goods sold=Sales revenueGross margin=$770$470(2)=$300 (3)

Determine the amount of sales revenue.

Sales revenue=Gross margin+Cost of goods sold=$880+$320=$1,200 (4)

Determine the amount of pretax income.

Pretax income=Net income after tax+Income tax expense=$275+$210=$485 (5)

Determine the amount of gross margin.

Gross margin= Pretax income+Selling expense+Administrative expense=$150+$45+$80=$275 (6)

Determine the amount of sales revenue.

Sales revenue=Gross margin+Cost of goods sold=$275(6)+$125=$400 (7)

Determine the amount of net income.

Net income=Pretax income Income tax expense=$150$60=$90 (8)

Determine the amount of gross margin.

Gross margin=Sales revenueCost of goods sold=$600$250=$350 (9)

Determine the amount of administrative expense.

Administrative expense=Gross marginSelling expense Pretax income=$350(9)$70$130=$150 (10)

Determine the amount of net income.

Net income=Pretax income Income tax expense=$130$45=$85 (11)

Determine the amount of cost of goods sold.

Cost of goods sold= Sales revenueGross margin=$1,050$630=$420 (12)

Determine the amount of selling expense.

Selling expense=Gross marginAdministrative expense Pretax income=$630$175$370=$85 (13)

Determine the amount of income tax expense.

Income tax expense=Pretax incomeNet income after tax=$370$240=$130 (14)

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Chapter 5 Solutions

Connect Access Card For Financial Accounting

Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - 14. Briefly define return on assets and what it...Ch. 5 - 1. If average total assets increase, but net...Ch. 5 - 2. If a company plans to differentiate its...Ch. 5 - 3. If a company reported the following items on...Ch. 5 - 4. Which of the following is one of the possible...Ch. 5 - Prob. 5MCQCh. 5 - Prob. 6MCQCh. 5 - Prob. 7MCQCh. 5 - Prob. 8MCQCh. 5 - Prob. 9MCQCh. 5 - 10. Net income was $850,000. Beginning and ending...Ch. 5 - Prob. 1MECh. 5 - Prob. 2MECh. 5 - Finding Financial Information: Matching Financial...Ch. 5 - Prob. 4MECh. 5 - Determining Financial Statement Effects of Sales...Ch. 5 - Recording Sales and Cost of Goods Sold and...Ch. 5 - Computing and Interpreting Return on...Ch. 5 - E5-1 Matching Players in the Accounting...Ch. 5 - Prob. 2ECh. 5 - E5-3 Finding Financial Information: Matching...Ch. 5 - Prob. 4ECh. 5 - Campbell Soup Company is the world’s leading maker...Ch. 5 - Prob. 6ECh. 5 - Macy’s, Inc., operates the two best-known high-end...Ch. 5 - E5-8 Preparing a Classified (Multiple-Step) Income...Ch. 5 - Tableau Software provides business analytics...Ch. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Pacific Gas and Electric Company is a giant public...Ch. 5 - Hasbro is one of the world’s leading toy...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - The TJX Companies, Inc., which operates the T.J....Ch. 5 - Analyzing and Evaluating Return on Assets from a...Ch. 5 - What would be the direction of the effect of the...Ch. 5 - Prob. 1PCh. 5 - Matching Definitions with Balance Sheet-Related...Ch. 5 - Exquisite Jewelers is developing its annual...Ch. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Preparing a Multiple-Step Income Statement with...Ch. 5 - Prob. 1APCh. 5 - Prob. 2APCh. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 1CONCh. 5 - Prob. 2CONCh. 5 - Refer to the financial statements of American...Ch. 5 - Refer to the financial statements of Express, Inc....Ch. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Making Decisions as a Manager: Evaluating the...Ch. 5 - Megan Company (not a corporation) was careless...Ch. 5 - Prob. 7CP
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