last year, john smarter started a business selling and repairing bicycles. he is somewhat successful, but he…
last year, john smarter started a business selling and repairing bicycles. he is somewhat successful, but he is tired of working 60 hours a week. with borrowed funds, smarter believes he will be able to expand to a larger store and then hire someone to help him. the banker asked smarter for his most recent income statement and balance sheet.\n1. prepare an income statement and find net income after taxes.\ngross sales $238,500 salaries and wages $78,790\nreturns $3500 rent & utilities $11,300\ninventory on jan. 1 $52,700 advertising $3300\ncost of goods purchased $98,400 miscellaneous expenses $4700\nfreight $2300 income taxes $3500\ninventory on dec. 31 $48,100\ngross sales $ \nreturns $
Answer
Explanation:
Step1: Calculate net sales
Net sales = Gross Sales - Returns. So, net sales = $238,500 - 3500=$235,000$.
Step2: Calculate cost of goods sold
Cost of Goods Sold = Inventory on Jan. 1+ Cost of Goods Purchased+ Freight - Inventory on Dec. 31. So, Cost of Goods Sold = $52,700+98,400 + 2300-48,100=$105,300$.
Step3: Calculate gross profit
Gross Profit = Net sales - Cost of Goods Sold. So, Gross Profit = $235,000 - 105,300=$129,700$.
Step4: Calculate total operating expenses
Total operating expenses = Salaries and Wages+ Rent & Utilities+ Advertising+ Miscellaneous Expenses. So, total operating expenses = $78,790+11,300 + 3300+4700=$98,090$.
Step5: Calculate operating income
Operating income = Gross Profit - Total operating expenses. So, operating income = $129,700 - 98,090=$31,610$.
Step6: Calculate net income after taxes
Net income after taxes = Operating income - Income taxes. So, net income after taxes = $31,610-3500=$28,110$.
Answer:
Net income after taxes is $$28,110$.