The following information applies to the questions displayed

[The following information applies to the questions displayed below. Below are amounts found in the income statements of three companies. Sales Cost of Operating Expenses $5,000 13,100 3,000 Non-operating Income Tax Company Revenue $32,000 35,000 40,000 Goods Sold Expenses $2,000 7,000 0 Expense $2,000 0 3,000 $4,800 Henry Grace James 24,500 24,800 value: Required information 1.25 points Required 1. For each company, calculate (a) gross profit, (b) operating income, (c) income before income taxes, and (d) net income. (Negative amounts should be indicated by a minus sign.) Gross Profit Operating Income Before Net Income Income taxes Income Loss Henry Grace James

Solution

HENRY

GRACE

JAMES

SALES

32000

35000

40000

(4800)

(24500)

(24800)

GROSS PROFIT

27200

10500

15200

(5000)

(13100)

(3000)

OPERATING INCOME

22200

(2600)

12200

(2000)

(7000)

0

INCOME BEFORE INCOME TAX

20200

(9600)

12200

(2000)

0

(3000)

NET INCOME /(LOSS)

18200

(9600)

9200

GROSS PROFIT

OPERATING INCOME

INCOME BEFORE INCOME TAX

NET INCOME /(LOSS)

HENRY

27200

22200

20200

18200

GRACE

10500

-2600

-9600

-9600

JAMES

15200

12200

12200

9200

Gross profit ratio calculation

GROSS PROFIT

SALES

GROSSPROFIT = (GROSSPROFIT/SALES)*100

GROSS PROFIT RATIO

HENRY

27200

32000

(27200/32000)*100

85%

GRACE

10500

35000

(10500/35000)*100

30%

JAMES

15200

40000

(15200/40000)*100

38%

Henry company has the most favorable ratio (GROSS PROFIT RATIO = 85%)

	HENRY	GRACE	JAMES
SALES	32000	35000	40000
COST OF GOODS SOLD	(4800)	(24500)	(24800)
GROSS PROFIT	27200	10500	15200
OPERATING EXPENSE	(5000)	(13100)	(3000)
OPERATING INCOME	22200	(2600)	12200
NON-OPERATING EXPENSE	(2000)	(7000)	0
INCOME BEFORE INCOME TAX	20200	(9600)	12200
INCOME TAX	(2000)	0	(3000)
NET INCOME /(LOSS)	18200	(9600)	9200