Chapter 28 v9 Problems to Ponder Answers

Chapter 28 v9 Problems to Ponder Answers - Chapter 28, SE...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch28 SE4 Chapter 28, SE 4. Sarot, Inc. Comparative Income Statements For the Years Ended December 31, 2010 and 2009 Increase or Decrease 2010 2009 Amount Percentage Net sales $720,000 $580,000 $140,000 24.1 Cost of goods sold 448,000 352,000 96,000 27.3 Gross margin $272,000 $228,000 $ 44,000 19.3 Operating expenses 160,000 120,000 40,000 33.3 Operating income $112,000 $108,000 $ 4,000 3.7 Interest expense 28,000 20,000 8,000 40.0 Income before income taxes $ 84,000 $ 88,000 ($ 4,000) (4.5) Income taxes expense 28,000 32,000 ( 4,000) (12.5) Net income $ 56,000 $ 56,000 $ Earnings per share $ 2.80 $ 2.80 $ The percentage increase in cost of goods sold was greater than the increase in net sales (27.3 percent versus 24.1 percent). As a result, the increase in gross margin is limited to 19.3 percent. Also, although sales and gross margin have increased by a large percentage, operating income is up only 3.7 percent because of the 33.3 per- cent increase in operating expenses. Income before income taxes has decreased as a result of the 40.0 percent increase in interest expense. That increase, however, was offset by a decrease in income taxes expense, so that net income is the same
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Chapter 28 v9 Problems to Ponder Answers - Chapter 28, SE...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online