Lemon Auto Wholesalers had sales of 1480000 last year and co

Lemon Auto Wholesalers had sales of $1,480,000 last year, and cost of goods sold represented 76 percent of sales. Selling and administrative expenses were 13 percent of sales. Depreciation expense was $14,000 and interest expense for the year was $10,000. The firm’s tax rate is 30 percent.

a. Compute earnings after taxes in Income statement form:

Solution

Lemon Auto Wholesalers Income statement Particulars Amount in $ Amount in $ REVENUE: Sales $                  14,80,000 Cost of Goods Sold $                  11,24,800 (76% of 1,480,000) Gross Profit $                     3,55,200 Operating Expenses Selling and administrative Expenses $             1,92,400 (13% of 1,480,000) Depreciation Expenses $                 14,000 $                     2,06,400 Operating Income $                     1,48,800 OTHER INCOME AND EXPENSES Less: Interest Expneses $                 10,000 $                        10,000 Net Income Before Tax $                     1,38,800 Less: Taxation @ 30% $                        41,640 Net income After Tax $                        97,160