Asked by Sameeha Riptee on Jul 06, 2024
Verified
The following information was taken from the financial statements of Lawson Company: 20172016 Gross profit on sales $900,000$840,000 Income before income taxes 280,000230,000 Net Income. 240,000216,0 Net income as a percentage of net sales 8%9%\begin{array}{lcc}&2017&2016\\ \text { Gross profit on sales } & \$ 900,000 & \$ 840,000 \\ \text { Income before income taxes } & 280,000 & 230,000 \\ \text { Net Income. } & 240,000 & 216,0 \\\text { Net income as a percentage of net sales }&8\%&9\%\end{array} Gross profit on sales Income before income taxes Net Income. Net income as a percentage of net sales 2017$900,000280,000240,0008%2016$840,000230,000216,09% Instructions
(a) Compute the net sales for each year.
(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year.
(c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).
Operating Expenses
Costs associated with the day-to-day operations of a business, such as rent, utilities, and salaries, excluding the cost of goods sold.
Cost of Goods Sold
The direct costs attributed to the production of goods sold by a business, including materials and labor.
Net Sales
The revenue a company generates from sales after deducting returns, allowances for damaged or missing goods, and discounts.
- Acquire knowledge on the analysis of financial statements through horizontal and vertical methods.
- Differentiate between various financial statement components and their significance.
Verified Answer
20172016 Gross profit $900,000$840,000 Less: Income before income taxes 280,000230,000 Operating Expenses $620,00$610,000% of net sales 20.7%25.4%\begin{array}{lrr}&2017&2016\\\text { Gross profit } & \$ 900,000 & \$ 840,000 \\\text { Less: Income before income taxes } &280,000 &230,000\\\text { Operating Expenses } &\$620,00&\$610,000 \\\\\% \text { of net sales }& 20.7 \% & 25.4 \%\end{array} Gross profit Less: Income before income taxes Operating Expenses % of net sales 2017$900,000280,000$620,0020.7%2016$840,000230,000$610,00025.4%
Learning Objectives
- Acquire knowledge on the analysis of financial statements through horizontal and vertical methods.
- Differentiate between various financial statement components and their significance.
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