Answer
See explanation
Work Step by Step
(a). IDENTIFICATION OF ITEMS:
Retained earnings -- Stockholders’ Equity (SE)
Cost of goods sold -- Expense (E)
Selling & administrative expenses -- Expense (E)
Cash -- Asset (A)
Notes payable -- Liability (L)
Interest expense -- Expense (E)
Bonds payable -- Liability (L)
Inventory -- Asset (A)
Sales revenue -- Revenue (R)
Accounts payable -- Liability (L)
Common stock -- Stockholders’ Equity (SE)
Income tax expense -- Expense (E)
(b). INCOME STATEMENT FOR KELLOGG COMPANY:
(DATA)
REVENUES:
- Sales revenue: 12,575 (Dollars)
COST OF GOODS SOLD: 7184 (Dollars)
OPERATING EXPENSES:
- Selling and administrative expenses: 3,390 (Dollars)
- Interest expense: 295 (Dollars)
- Income tax expense: 498 (Dollars)
CALCULATION OF INCOME STATEMENT:
FORMULA FOR INCOME STATEMENT:
$Gross Profit = Revenues – Cost Of Goods Sold$
$Net Income = Gross Profit – Operating Expenses$
FIND:
Gross Profit = ?
Net Income = ?
SOLUTION:
GROSS PROFIT:
Revenues = 12,575 (Dollars), Cost of Goods Sold = 7184 (Dollars)
Gross Profit = 12,575 – 7184
Gross Profit = 5391 (Dollars)
NET INCOME:
Gross Profit = 5391 (Dollars)
Operating Expenses = 3390 + 295 + 498
Operating Expenses = 4183 (Dollars)
Net Income Income = 5391 – 4183
Net Income = $1208
