Preview

CORBIN ENTERPRISES Income Statement

Satisfactory Essays
Open Document
Open Document
269 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
CORBIN ENTERPRISES Income Statement
Refer to the list of income statement items in Problem 2-6A. Assume that Corbin Enterprises classifies all operating expenses into two categories:
(1) Selling and
(2) General and administrative.

Required
1. Prepare a multiple-step income statement for the year ended December 31, 2010.
2. What advantages do you see in this form for the income statement?
3. Compute Corbin’s profit margin.
4. Comment on Corbin’s profitability. What other factors need to be taken into account to assess Corbin’s profitability?

SOLUTION

1. Multiple-step income statement:
CORBIN ENTERPRISES
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2010

Sales $350,000 Cost of goods sold 150,000 Gross profit $200,000 Operating expenses: Selling expenses: Advertising $ 9,000 Rent—salesperson’s car 18,000 Total selling expenses $ 27,000 General and administrative expenses: Depreciation—computer $ 4,500 Rent—office 26,400 Supplies—office 1,300 Wages—office 45,600 Utilities 6,750 Total general and administrative expenses 84,550 Total operating expenses 111,550 Income from operations $ 88,450 Other revenues and expenses: Interest expense $ 1,900 Dividend revenue 2,700 Excess of other revenues over other expenses 800 Income before taxes $ 89,250 Income tax expense 30,700 Net income $ 58,550

2. The main advantages of the multiple-step income statement are the groupings of various items and the provision of important subtotals such as income from operations.

3. Profit Margin = Net Income/Sales = $58,550/$350,000 = 16.7%

4. A profit margin of 16.7% means that for every dollar of sales the company has net income of $0.167. This would appear to be a good profit margin, but it would be important to compare the profit margin with prior years and with other companies in the same industry.

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Busa 321

    • 1569 Words
    • 7 Pages

    What is the firm’s profit margin (return on sales)? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)…

    • 1569 Words
    • 7 Pages
    Satisfactory Essays
  • Good Essays

    Brandywine Homecare

    • 1320 Words
    • 6 Pages

    A profit margin is the difference between sales generated and the cost to produce each of the units sold. A profit margin refers to a measure of profitability and is an indicator of a company’s pricing strategy and how well it controls costs. Businesses pay especially close attention to profit margins because they can provide valuable information as to the financial condition of the company. Profit margins are presented in percentage terms.…

    • 1320 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    Classify the items as (1) operating—add to net income; (2) operating—deduct from net income; (3) investing; (4) financing; or (5) significant noncash investing and financing activities. Use the indirect method.…

    • 671 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    The net profit margin is the after tax profit a company generates for each dollar of revenue. A higher net profit margin is usually preferable as this indicates that the company…

    • 1050 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    Finratios

    • 954 Words
    • 4 Pages

    * Net profit margin- a ratio of that measure how much out of every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.…

    • 954 Words
    • 4 Pages
    Powerful Essays
  • Satisfactory Essays

    Harrod S Sporting Goods

    • 36 Words
    • 3 Pages

    Profit Margin = Net Income / Sales 2007 4.524726859 4.50% Return on Assets = a) Net income ÷ Total assets 6.094252729 6.10% b)(Net income ÷ Sales) x (Sales ÷ Total Assets) 6.094252729 6.10% Return on Equity = a) Net Income/Stockholders Equity…

    • 36 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    3. Define accrual accounting and contrast it with cash basis accounting. Accrual accounting realizes accounting changes as the revenue and expenses during the period in which it occurs. You will see the cash method used by small businesses because cash in hand is king and they cannot afford to count it any other way. So cash base is simply that you count it when it is actually received and the same goes for any expenses, they are counted when taken.…

    • 643 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Hrm 531 Week 3 Quiz

    • 4852 Words
    • 20 Pages

    25. A multiple-step income statement reports multiple levels of profitability, such as gross profit, operating…

    • 4852 Words
    • 20 Pages
    Powerful Essays
  • Powerful Essays

    Answers To Assignment 2 1

    • 2996 Words
    • 21 Pages

    P&G uses the multiple-step income statement because it separates operating from nonoperating activities. A multiple-step income statement is used to recognize additional relationships related to revenues and expenses. P&G recognizes a separation of operating transactions from nonoperating transactions. As a result, trends in income from continuing operations should be easier to understand and analyze. Disclosure of operating income may assist in comparing different companies and assessing operating efficiencies.…

    • 2996 Words
    • 21 Pages
    Powerful Essays
  • Satisfactory Essays

    Problem 1-7A (75 minutes) Part 1 DE LEON COMPANY Manufacturing Statement For Year Ended December 31, 2013 Direct materials Raw materials inventory, December 31, 2012 $ 166,850 Raw materials purchases 925,000 Raw materials available for use 1,091,850 Less raw materials inventory, December 31, 2013 182,000 Direct materials used $ 909,850 Direct labor 675,480 Factory overhead Depreciation expense—Factory equipment 33,550 Factory supervision 102,600 Factory supplies used 7,350 Factory utilities 33,000 Indirect labor 56,875 Miscellaneous production costs 8,425 Rent expense—Factory building 76,800 Maintenance expense—Factory equipment 35,400 Total factory overhead costs…

    • 2947 Words
    • 12 Pages
    Satisfactory Essays
  • Satisfactory Essays

    merits of presenting an income statement in a multiple-step versus a single-step format. The discussion…

    • 921 Words
    • 4 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Acc/300 Week 4

    • 889 Words
    • 4 Pages

    P2-6B Condensed balance sheet and income statement data for Fellenz Corporation are presented below. FELLENZ CORPORATION Balance Sheets December 31 Assets 2012 2011 Cash $40,000 $24,000 Receivables (net) 90,000 55,000 Other current assets 74,000 73,000 Long-term investments 78,000 60,000 Plant and equipment (net) 520,000 407,000 Total assets $802,000 $619,000 Liabilities and Stockholders’ Equity 2012 2011…

    • 889 Words
    • 4 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Bus512

    • 517 Words
    • 3 Pages

    1. Identify expenses on the income statement that are sales fulfillment expenses and divide them into cost pools.…

    • 517 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Net Profit Margin- The net profit margin of 18.34 percent for 2008 indicates that 18.34 cents of net income was generated for each dollar of sales. The significant increase of 7.83 percent, from 2007’s 10.51 percent, yielded an additional $1.84 billion in profit on the company’s $23.52 billion in revenue.…

    • 1176 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    9. During 20A, Burton Company delivered products to customers for which customers paid or promised to pay $3,820,000. The company collected $3,670,000 in cash from customers during the year. Indicate which of these amounts will appear on the income statement and which on the statement of cash flows. A) $3,670,000 appears on both the income statement and statement of cash flows. B) $3,670,000 appears on the statement of cash flows, and $3,820,000 appears on the income statement. C) $3,820,000 appears on both the income statement and the statement of cash flows. D) $3,820,000 appears on the statement of cash flows, and $3,670,000 appears on the income…

    • 554 Words
    • 3 Pages
    Powerful Essays

Related Topics