Answer of Chapter 17

# Answer of Chapter 17 - PROBLEMS Prob. 171A 1. DOANE INC....

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PROBLEMS Prob. 17–1A 1. DOANE INC. Comparative Income Statement For the Years Ended December 31, 2008 and 2007 Increase (Decrease ) 2008 2007 Amount Percent Sales. ................................................ \$ 91,500 \$ 73,200 \$ 18,300 25.0% Sales returns and allowances. ....... 1,440 1,200 240 20.0% Net sales . ......................................... \$ 90,060 \$ 72,000 \$ 18,060 25.1% Cost of goods sold. ......................... 50,400 42,000 8,400 20.0% Gross profit. ..................................... \$ 39,660 \$ 30,000 \$ 9,660 32.2% Selling expenses . ............................ \$ 16,560 \$ 14,400 \$ 2,160 15.0% Administrative expenses. ............... 10,800 9,600 1,200 12.5% Total operating expenses. .............. \$ 27,360 \$ 24,000 \$ 3,360 14.0% Income from operations . ................ \$ 12,300 \$ 6,000 \$ 6,300 105.0% Other income. .................................. 600 600 0 0.0% Income before income tax. ............. \$ 12,900 \$ 6,600 \$ 6,300 95.5% Income tax expense . ....................... 2,880 1,440 1,440 100.0% Net income. ...................................... \$ 10,020 \$ 5,160 \$ 4,860 94.2% 2. The profitability has significantly improved. Net sales have increased by 25.1% over the 2007 base year. In addition, however, cost of goods sold, sell- ing expenses, and administrative expenses grew at a slower rate. Increasing sales combined with costs that increase at a slower rate results in strong earnings growth. In this case, net income grew 94.2% over the base year. 480

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Prob. 17–2A 1. DUSAN WATER SUPPLIES INC. Comparative Income Statement For the Years Ended December 31, 2008 and 2007 2008 2007 Amount Percent Amount Percent Sales. ................................................... \$ 255,000 102.0% \$ 214,000 101.9% Sales returns and allowances. .......... 5,000 2.0 4,000 1.9 Net sales . ............................................ \$ 250,000 100.0% \$ 210,000 100.0% Cost of goods sold. ............................ 142,500 57.0 121,800 58.0 Gross profit. ........................................ \$ 107,500 43.0 % \$ 88,200 42.0 % Selling expenses . ............................... \$ 100,000 40.0% \$ 50,400 24.0% Administrative expenses. .................. 20,000 8.0 16,800 8.0 Total operating expenses. ................. \$ 120,000 48.0 % \$ 67,200
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## This note was uploaded on 10/20/2010 for the course E 2292 taught by Professor Linh during the Spring '10 term at Troy.

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Answer of Chapter 17 - PROBLEMS Prob. 171A 1. DOANE INC....

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