Preparing an Income Statement Essay

355 WordsAug 8, 20122 Pages
Preparing an Income Statement ACC / 230 Preparing an Income Statement 3.10 Coyote, Inc. Income Statement For the Year Ended December, 31, 2011 Sales $1,833,000 Cost of goods sold 1,072,000 Gross profit 731,000 Operating expenses: Sell expenses 279,000 General and admin. Expenses 175,000 Deprecation 14,000 Total operating expense 468,000 Operation income 293,000 Non-operating or other: Interest income 13,000 Interest expense 16,000 Total non-operating (3,000) Income before income taxes 290,000 Income tax expense 116,000 Net income $ 174,000 There was only one year available while completing this multi-step income state which made it hard to compare the financial year of 2011 to previous years. This prevented me from being able to tell if the numbers had increased or decreased from previous years. The information I was presented with on the income statement are not complete and sufficient barometers of financial performance. This is because the income statement is partially the product of a wide range of accounting statements used. The income statement with other financial statements are all used together in accounting choices such as estimates, and judgments that affect reports results, just as business policies economic conditions and many other variables affect the results. For Coyote Inc. the cost of goods sold was 58.5%. Because I could not see pervious years I am not aware if this is a lower or higher cost. This is important because the cost of goods sold is usually the highest expense for a business. The gross profit margin indicates how much profit the business is generating after deducting the cost of products or services sold. In the case of Coyote Inc. it is at 41.5%. At 16% is the operating profit which measures how the

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