Income Statement

For the year Ended December 31, 2011

Sales $4,200,000

Cost of Sales 3.576,000

Gross Profit 624,000

Selling Expenses $300,000

Administrative expenses 96,000 396,000

Income from Operations 228,000

Interest Expense 36,000

Income before taxes 192,000

Income taxes 48,000

Net Income $144,000

Dividends for the year 20111 were $96,000.

During the year, equipment was sold for $120,000. This equipment cost $176,000 originally and hada book value of $144,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.

All depreciation expense is in the selling expense category.

Direct method

Under the direct method, the cash received from customers is

a. $4,272,000

b. $4,128,000

c. $4, 200,000

d. $4,220,000