How to Prepare an Income Statement for Times Corporation from the provided data?
To prepare an income statement for Times Corporation, we need to follow certain steps based on the data provided. The income statement shows the revenue and expenses of a company for a specific period. In this case, we will be preparing the income statement for the year ended 30 June 2020 using the following formulae and calculations:
Step 1: Calculate the Cost of Goods Sold (COGS):
Cost of Sales = Opening Inventory + Purchases - Closing Inventory
= $0 + $700,000 - $200,000
= $500,000
Step 2: Prepare the income statement for Times Corporation:
Income statement = Revenue - COGS - Operating Expenses - Other expenses
Revenue:
Sales revenue + Interest income
= $955,000 + $50,000
= $1,005,000
Operating Expenses:
Selling expense + Salary expense
= $45,000 + $140,000
= $185,000
Other expenses:
Income tax expense
= $20,000
Income statement:
= $1,005,000 - $500,000 - $185,000 - $20,000
= $300,000
Therefore, the net income for Times Corporation is $300,000 based on the calculations from the provided data.
Income Statement Preparation
An income statement, also known as a profit and loss statement, is a financial document that provides an overview of a company's revenue and expenses over a specific period. It is an essential tool for evaluating the financial performance of a business.
Revenue:
Revenue represents the total income generated by the company from its core operations and other sources. In the case of Times Corporation, the revenue is derived from sales revenue and interest income, totaling $1,005,000.
Cost of Goods Sold (COGS):
The COGS is the direct cost associated with the production of goods sold by the company. It includes the cost of materials, labor, and overhead expenses. In this case, the COGS for Times Corporation is calculated as $500,000.
Operating Expenses:
Operating expenses are the costs incurred by a company in its normal business operations. For Times Corporation, the operating expenses consist of selling expenses and salary expenses, amounting to $185,000.
Other Expenses:
Other expenses include items such as income tax expenses, which are deducted from the revenue to arrive at the net income. In this case, the income tax expense is $20,000.
Net Income:
After deducting the COGS, operating expenses, and other expenses from the revenue, the net income for Times Corporation is calculated as $300,000. This represents the profit earned by the company after accounting for all costs and expenses.
In conclusion, the income statement provides a comprehensive summary of the financial performance of Times Corporation for the specified period, highlighting its revenue, expenses, and ultimately, its net income.