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

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Accounting

Re-organize the scrambled accounts into the income statement forPet Land Inc., a pet food and accessories retailer in a smallCanadian town.

You will have to calculate Sales Revenue, Cost of Goods Sold,the amount of tax that was paid, the totals for the sections of thestatement and determine Gross Margin, Operating Margin, IncomeBefore Tax and Net Income.

Compile Sales Revenue from Gross Sales Revenue and record it onthe statement.

Compile the Cost of Goods Sold from the appropriate accounts andadd it to the statement. Calculate the Gross Margin and record iton the statement.

List the Operating Expenses on the statement and total it.Calculate the Operating Margin and record it on the statement.

List the Non-operating Expenses on the statement, calculate andrecord Income Before Tax, calculate and record Taxes and calculateand record Net Income.

Accounts

Values

Cleaning & Maintenance5,000

Office Supplies
2,000
Discounts12,300

Fixed Utilities (telephone, heat, hydro)		2,000
Purchases256,750
Depreciation15,000
Beginning Inventory42,500
Taxes @ 34%You calculate
Gross Sales Revenue697,200
Closing Inventory33,250
Returns19,900
Salaries176,000
Interest Expense7,000

Advertising & Promotion		25,000
Ending Inventory33,250

Answer & Explanation Solved by verified expert
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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