In its income statement for the year ended December 31, 2027, Crane Inc. reported the following condensed data.
Operating expenses: $754,000
Cost of goods sold: 1,306,240
Interest expense: 72,800
Income tax expense: 48,880
Interest revenue: $34,320
Loss on disposal of plant assets: 17,680
Net sales: 2,288,000
Prepare an income statement. (List other revenues before other expenses.)
The Correct Answer and Explanation is:
Crane Inc.
Income Statement
For the Year Ended December 31, 2027
| Item | Amount ($) |
|---|---|
| Net Sales | 2,288,000 |
| Cost of Goods Sold | (1,306,240) |
| Gross Profit | 981,760 |
| Operating Expenses | (754,000) |
| Income from Operations | 227,760 |
| Other Revenues and Gains | |
| Interest Revenue | 34,320 |
| Other Expenses and Losses | |
| Interest Expense | (72,800) |
| Loss on Disposal of Plant Assets | (17,680) |
| Income Before Income Taxes | 171,600 |
| Income Tax Expense | (48,880) |
| Net Income | 122,720 |
Explanation
The income statement is a financial statement that presents a company’s financial performance over a specific period. For Crane Inc., the income statement for the year ended December 31, 2027, includes several important components.
We start with Net Sales of $2,288,000. From this, we subtract the Cost of Goods Sold (COGS) of $1,306,240 to calculate Gross Profit, which comes to $981,760. Gross profit indicates how efficiently a company produces and sells its products.
Next, we deduct Operating Expenses, which amount to $754,000, resulting in Income from Operations of $227,760. This figure reflects earnings from the company’s core business operations, excluding non-operating revenues and expenses.
Then we include Other Revenues and Gains and Other Expenses and Losses. Interest revenue of $34,320 is added, while interest expense of $72,800 and loss on disposal of plant assets of $17,680 are subtracted. This results in Income Before Income Taxes of $171,600.
After deducting Income Tax Expense of $48,880, the final line, Net Income, is $122,720. This is the company’s bottom line—its profit after accounting for all revenues, costs, and expenses.
The layout places revenues and gains before expenses and losses to give a clearer picture of Crane Inc.’s operating performance and the impact of non-operating items. This format helps users of financial statements—such as investors, analysts, and managers—understand how much of the net income comes from core operations versus peripheral activities.
Overall, this income statement shows that Crane Inc. operated profitably in 2027, with a strong gross margin and controlled expenses.
