To prepare the income statement for ABC LTD for the year ended December 31, 2024, we will calculate the gross profit, operating income, and finally the net income after deducting taxes. Below are the steps involved in the calculation:
1. Calculate Net Sales
Net Sales = Sales Revenue - Sale Returns
Net Sales = 250,000 - 10,000
Net Sales = 240,000
2. Calculate Cost of Goods Sold (COGS)
COGS = Opening Stock + Purchases - Closing Inventory
COGS = 30,000 + 100,000 - 20,000
COGS = 110,000
3. Calculate Gross Profit
Gross Profit = Net Sales - COGS
Gross Profit = 240,000 - 110,000
Gross Profit = 130,000
4. Calculate Total Operating Expenses
Operating Expenses include Sales Expenses, Rent Expenses, Utilities Expenses, and Depreciation Expenses.
Total Operating Expenses = Sales Expenses + Rent Expenses + Utilities Expenses + Depreciation Expenses
Total Operating Expenses = 40,000 + 12,000 + 3,000 + 5,000
Total Operating Expenses = 60,000
5. Calculate Operating Income
Operating Income = Gross Profit - Total Operating Expenses
Operating Income = 130,000 - 60,000
Operating Income = 70,000
6. Calculate Net Income Before Tax
Net Income Before Tax = Operating Income + Interest Income - Interest Expenses
Net Income Before Tax = 70,000 + 1,500 - 2,000
Net Income Before Tax = 69,500
7. Calculate Tax
Tax = Net Income Before Tax × Tax Rate
Tax = 69,500 × 20%
Tax = 13,900
8. Calculate Net Income
Net Income = Net Income Before Tax - Tax
Net Income = 69,500 - 13,900
Net Income = 55,600
Income Statement for ABC LTD for the Year Ended December 31, 2024
| Income Statement | Amount (few) | |--------------------------------|--------------| | Sales Revenue | 250,000 | | Less: Sales Return | (10,000) | | Net Sales | 240,000 | | Opening Stock | 30,000 | | Purchases | 100,000 | | Closing Inventory | (20,000) | | Cost of Goods Sold (COGS) | 110,000 | | Gross Profit | 130,000 | | Less: Operating Expenses | | | - Sales Expenses | 40,000 | | - Rent Expenses | 12,000 | | - Utilities Expenses | 3,000 | | - Depreciation Expenses | 5,000 | | Total Operating Expenses | 60,000 | | Operating Income | 70,000 | | Add: Interest Income | 1,500 | | Less: Interest Expenses | (2,000) | | Net Income Before Tax | 69,500 | | Less: Tax | (13,900) | | Net Income | 55,600 |
Thus, the net income for ABC LTD for the year ended December 31, 2024, is 55,600.