Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 91

Calculate operating income and net income The following information is available from the accounting records of Manahan Co. for the year ended December 31, 2010:

Net cash provided by financing activities	$112,000
Dividends paid	18,000
Extraordinary loss from flood, net of tax savings of $35,000	105,000
Income tax expense	26,000
Other selling expenses	13,000
Net sales	644,000
Advertising expense	45,000
Accounts receivable	62,000
Cost of goods sold	368,000
General and administrative expenses	143,000

Required:

a. Calculate the operating income for Manahan Co. for the year ended December 31, 2010.

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b. Calculate the company’s net income for 2010.

Step 1 of 3

Calculate operating income & net income

a.

Calculate operating income of M Co. with provided accounting records for the year ended December 31, 2010:

• Consider net sales.

• Add cost of goods sold to net sales to arrive at gross profit.

• Enter advertising expense, selling expense and general administrative expense.

• Deduct expenses from gross profit to arrive at operating income.

M Co.
Operating income
For the year ending December 31, 2010
Particulars	Amount
Net sales	644,000
Cost of goods sold	(368,000)
Gross profit	276,000
Advertising expense	(45,000)
Other selling expenses	(13,000)
General and administrative expenses	(143,000)
Operating income	75,000