Prepare an income statement.
Mason Company
Income Statement
Sales
5 657,000
Cost of goods sold
Gross loss
657.000
Selling and administrative expenses.
Selling expenses
Administrative expense
Selling expenses
Net operating income
0
S
657,000
The Correct Answer and Explanation is :
Here is the correct income statement for Mason Company based on the information provided:
Mason Company
Income Statement
| Description | Amount (in $) |
|---|---|
| Sales | 5,657,000 |
| Cost of Goods Sold (COGS) | 657,000 |
| Gross Profit (Loss) | 5,000,000 |
| Selling Expenses | (Provided value missing; assume 0 for now) |
| Administrative Expenses | (Provided value missing; assume 0 for now) |
| Net Operating Income | (Needs calculations) |
Explanation:
- Sales: The total revenue from selling goods or services. For Mason Company, this amount is $5,657,000.
- Cost of Goods Sold (COGS): This represents the direct costs associated with producing the goods or services sold. For Mason, this is $657,000.
- Gross Profit (Loss): This is calculated as sales minus the cost of goods sold (COGS). For Mason Company:
[
\text{Gross Profit} = \text{Sales} – \text{COGS} = 5,657,000 – 657,000 = 5,000,000
]
Gross profit represents the difference between the revenue from sales and the direct costs associated with producing the products or services. - Selling Expenses: These are the costs related to marketing, advertising, and selling the products or services. Unfortunately, the value is missing in your data.
- Administrative Expenses: These are overhead costs like salaries for office staff, rent, utilities, and other expenses not directly related to the production or sales of goods. Again, this value is missing.
- Net Operating Income: To calculate this, we need to subtract the selling and administrative expenses from the gross profit. The formula is:
[
\text{Net Operating Income} = \text{Gross Profit} – \text{Selling Expenses} – \text{Administrative Expenses}
]
If the selling and administrative expenses were provided, we’d subtract those from the gross profit to determine the net operating income. Without these figures, the exact value can’t be calculated here.
In summary, the key components of the income statement include sales, cost of goods sold, gross profit, and the operating expenses (selling and administrative). The income statement provides insight into a company’s profitability over a specific period, helping management and investors understand the company’s financial health.