Prepare Kayceys income statement for the year ended December

Prepare Kayceys income statement for the year ended December 31, 2012 from the information provided below. Only use line items pertaining to an income statement.

Research & Development Expenses   $50.000   

Loss from discontinued operations 16.000

Extraordinarygain from lawsuit settlement. Net of tax expense $12.000 $55.000

Selling general and administrative expenses $ 28,000

Gross Profit 150,000

Net Sales 500,000

Provision for income taxes 32,000

Interest Expense 35,000

Net cash provided by Operations 75,000

Accounts Recievable 40,000

Solution

The desired income statement for the year ended December 31, 2012 is as under :

1. Net sales - 500000

2. Non operating Income ( settlement of lawsuit, net of tax) - 55000

3. Sub total ( 1 + 2) - 555000

4. Expenses

i. Selling, General & Administrative Expenses - 28000

ii.Research & Development Expenses - 50000

iii.Interest Expenses - 35000

iv. Provision for income tax - 32000

v. Loss from discontinued operations - 16000

5. Total Expenses ( i to v above) - 161000   

6. Gross Profit ( 3 -5) - 394000

However, since the gross profit ( it is presumed that this gross profit is after tax) has been stated to be 150000, there has to a missing entry which is likely to be pertaining to stock adjustment. The opening stocks - closing stocks is likely to be 394000 - 150000 = 244000 if there are no other missing entries.. -