Over Accrual Accounting
There is a Part A and Part B to this CE-do them both as you won't be able to resubmit
later!
Part A. The following information is available for Entity A:
Sales revenue
Sales returns and allowances
Sales discounts
Cost of goods sold
Operating expenses
Interest expense
Loss on disposal of equipment
Interest revenue
Instructions
$2,350,000
100,000
50,000
1,300,000
725,000
70,000
17,000
25,000
1. Use the above information to prepare a multiple-step income statement for the year
ended December 31, 2024. Please look at Illus. 5.12 in the text for an example. The
income tax rate is 23% (round to the nearest dollar). Check figures: Income from
operations is $175,000. Net income is $87,010.
2. Compute the profit margin and the gross profit rate. Show and label calculations.
3. Suggest at least three ways these measures might be materially improved and net
income increased. Be sure to consider the relationship between net sales, cost-of-
goods-sold and gross profit as well as operating expenses.