Income Statement Preparation
Listed below are the results of Bennett?s operations for 2005 and
2006. (Assume 4,000 shares of outstanding stock for both years.)
2006 2005
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . $300,000 $350,000
Utilities expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 15,000 8,500
Employee salaries . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 115,000 110,000
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 10,000 20,000
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 9,000 36,500
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 25,000 15,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 115,000 85,000
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 10,000 10,000
Required:
1. Prepare a comparative income statement for Bennett, Inc, for
the years ended December
31, 2006, and 2005. Be sure to include figures for gross margin,
operating income,income before taxes, net income, and earnings per
share.
2. Interpretive Question: What advice would you give Bennett Inc., to
improve its profitability for the year 2007?