1. Identify the 3 main financial statements?

Discuss the purpose of each statement?

Explain how income statement is linked to the balance sheet?

2. Use this information to prepare a financial statement for company ABC Co for the 12 months ended 31st December 2019 Distribution expenses $ 8,000

Salaries and wages related to selling product $ 16,000

Advertisements and promotions for Product $ 5,000

Salaries and wages for administrative staff $ 7,500

Office supplies expenses $ 1500

administrative utility expenses $ 3000

Depreciation on office equipment $ 750

Interest expense $ 1500

Cost of direct material purchase for product Alpha $ 165,000

Cost of stock at the beginning of the period Alpha $ 15,000

Cost of stock at the end of the period Alpha $ 20,000

Revenue from sale of Product Alpha $ 312,500

Based on the above information prepare a basic financial statement and identify the following.

i. Gross Profit

ii. Total operating expenses (Show separately your selling distribution expenses and administrative expenses)

iii. Operating income

iv. Net income (Assume your business is taxed at 4%)

v. Correct Income statement with clear separation of items