Question

1:ABC LTD provide the following financial data for the year ended December 31,2024
Item. Amount (few)
Sales revenue. 250,000
Sale return. 10000
Opening stock. 30000
Purchase. 100000
Closing inventory. 20000
Sales expenses. 40000
Rent expenses. 12000
Utilities expenses. 3000
Depreciation expenses. 5000
Interest income. 1500
Interest expenses. 2000
Tax rate. 20%
Required: prepare the income statement and calculate the net income for the year .

Answer 1

To prepare the income statement and calculate the net income for ABC LTD for the year ended December 31, 2024, we will follow these steps:

1. **Calculate Net Sales:**
\[
\text{Net Sales} = \text{Sales Revenue} - \text{Sales Return}
\]
\[
\text{Net Sales} = 250,000 - 10,000 = 240,000
\]

2. **Calculate Cost of Goods Sold (COGS):**
\[
\text{COGS} = \text{Opening Stock} + \text{Purchases} - \text{Closing Inventory}
\]
\[
\text{COGS} = 30,000 + 100,000 - 20,000 = 110,000
\]

3. **Calculate Gross Profit:**
\[
\text{Gross Profit} = \text{Net Sales} - \text{COGS}
\]
\[
\text{Gross Profit} = 240,000 - 110,000 = 130,000
\]

4. **Calculate Total Expenses:**
\[
\text{Total Operating Expenses} = \text{Sales Expenses} + \text{Rent Expenses} + \text{Utilities Expenses} + \text{Depreciation Expenses}
\]
\[
\text{Total Operating Expenses} = 40,000 + 12,000 + 3,000 + 5,000 = 60,000
\]

5. **Calculate Operating Income:**
\[
\text{Operating Income} = \text{Gross Profit} - \text{Total Operating Expenses}
\]
\[
\text{Operating Income} = 130,000 - 60,000 = 70,000
\]

6. **Calculate Total Other Income/Expenses:**
\[
\text{Total Other Income} = \text{Interest Income} - \text{Interest Expenses}
\]
\[
\text{Total Other Income} = 1,500 - 2,000 = -500 \quad (\text{This will be treated as an expense})
\]

7. **Calculate Earnings Before Tax (EBT):**
\[
\text{EBT} = \text{Operating Income} + \text{Total Other Income}
\]
\[
\text{EBT} = 70,000 - 500 = 69,500
\]

8. **Calculate Income Tax:**
\[
\text{Income Tax} = \text{EBT} \times \text{Tax Rate}
\]
\[
\text{Income Tax} = 69,500 \times 0.20 = 13,900
\]

9. **Calculate Net Income:**
\[
\text{Net Income} = \text{EBT} - \text{Income Tax}
\]
\[
\text{Net Income} = 69,500 - 13,900 = 55,600
\]

### Income Statement for ABC LTD
For the year ended December 31, 2024
\[
\begin{array}{l r}
\text{Sales Revenue} & 250,000 \\
\text{Less: Sales Returns} & (10,000) \\
\hline
\text{Net Sales} & 240,000 \\
\hline
\text{Cost of Goods Sold} & (110,000) \\
\hline
\text{Gross Profit} & 130,000 \\
\hline
\text{Operating Expenses} & \\
\text{Sales Expenses} & (40,000) \\
\text{Rent Expenses} & (12,000) \\
\text{Utilities Expenses} & (3,000) \\
\text{Depreciation Expenses} & (5,000) \\
\hline
\text{Total Operating Expenses} & (60,000) \\
\hline
\text{Operating Income} & 70,000 \\
\hline
\text{Other Income/Expenses} & \\
\text{Interest Income} & 1,500 \\
\text{Interest Expenses} & (2,000) \\
\hline
\text{Total Other Income/Expenses} & (500) \\
\hline
\text{Earnings Before Tax (EBT)} & 69,500 \\
\text{Less: Income Tax} & (13,900) \\
\hline
\text{Net Income} & 55,600 \\
\end{array}
\]

### Summary
- **Net Income:** \$55,600