Income Statement Preparation and Analysis Tensel Corporation markets high-quality grinding tools. During 2000, Tensel Corporation recorded the following:

1. Total sales revenue was $578,000.

2. Inventory purchases were $345,000.

3. In addition to selling all of the inventory purchased during 2000, inventory was reduced from $120,000 at January 1, 2000, to $75,000 at December 31, 2000.

4. Wage and salaries expense was $100,000.

5. Dividend income on investments was $26,000.

6. Interest expense on bank loans was $35,000.

7. The company decided to sell the cars driven by sales personnel and lease all automobiles. The cars sold had a book value of $85,000 and were sold for $165,000.
8. As a result of a change in accounting procedures, the book value of certain depreciable assets as of January 1, 2000, was increased from $220,000 to $255,000, with an accompanying $35,000 cumulative adjustment (increase)
to income for 2000.
9. Using the new accounting procedures, depreciation expense on equipment used for delivery during 2000 was $40,000.
10. Sales returns and allowances for 2000 were $12,000.
11. The company paid a special $9,000 bonus to the company president on December 20, 2000.
12. On December 30, 2000, the board of directors declared and paid a dividend on common stock in the amount of $50,000.
13. Income tax expense for 2000 was computed to be $30,000.
Using this information, do the following:

a. Prepare an income statement for Tensel Corporation for 2000.

b. Compute the return on total sales (net income divided by sales revenue) for 2000. The company has a goal of earning a 20 percent return on total sales. Did Tensel Corporation meet its goal in 2000?

c. Determine what factors in addition to the sale of products were important in generating Tensel’s reported net income for 2000. Does it appear likely that Tensel will meet its goal in 2001? Describe the factors you consider important in answering.