Answer to Question #148599 in Accounting for Sania riaz

Question

Prepare Income Statement with following data.
1) Net Income for the year Rs. 1.2 Million
2) Rate of Income 0.1 time of the sales
3) Gross profit 0.4 time of sales
4) Marketing Expense 10% of sales
5) 7% bonds payable represent 37.5% of total liabilities Rs. 2 Million.

Answer 1

Solution:

Sales = Rs. 2,000,000

Income = 0.1 x 2,000,000 = 200,000

Gross Profit = 0.4 x 2,000,000 = 800,000

Marketing Expense = 10% x 2,000,000 = 200,000

Interest Expense = 7% x (37.5% x 2,000,000) = 52,500

Income Statement

Rs.

              Sales                                                  2,000,000

Less:Cost of sales                                           (1,200,000)

        Gross Profit                                                800,000

Less:Marketing Expense                                      200,000

        Operating income                                       600,000         

Add: Other income                                              200,000

 Less: Interest expense                                         (52,500)   

Net Income                                                       747,500