Income Statement

The goal of a business is to make a profit. Financial statements such as income statements and balance sheets report how successful a business has been in achieving this goal.

1. Use spreadsheet software to create an income statement for Sweet Treats using the data shown below step 8. Format the income statement similar to the one shown in Figure 1-2.2. Use appropriate number formats and rules under numbers as shown in Figure 1-2.2.

2. Enter the appropriate headings and date the income statement for the year ended December 31 of the current year.

3. Enter a formula to subtract the cost of goods sold from sales to find the gross profit on sales.

4. Enter a formula to subtract the total operating expenses from the gross profit on sales to find the net income from operations.

5. Enter a formula to subtract other expenses or add other income to find net income before income tax.

6. Enter a formula to subtract income tax to find net income after income tax.

7. Enter formulas to calculate the percentage of sales for gross profit on sales, net income from operations, net income before tax, and net income after tax. (Divide each number by sales.)

8. One goal of Sweet Treats is to have net income that is 25 percent of sales or higher. Assuming the company sells the same amount of merchandise and expenses and taxes remain the same, how much would the company have to increase prices to meet this goal?

Data for an income statement for the year ended December 31 of the current year:

Sales $325,000

Cost of Goods Sold 175,000

Operating Expenses

Advertising Expense 1,000

Delivery Expense 2,000

Office Supplies Expense 500

Payroll Taxes Expense 5,000

Salaries Expense 58,000

Utilities Expense 3,000

Miscellaneous Expense 400

Other Expense

Interest 2,500

Income Tax 11,500