# Objective Prepare an income statement for Rex Manufacturing for the year ended December 31 using provided information. --- ## **Step 1: Organize Available Data** Given Data: - **Sales:** $93,200 - **Finished goods inventory, beginning:** $19,600 - **Cost of goods manufactured:** $40,600 - **Finished goods inventory, ending:** $16,600 - **General and administrative expenses:** $14,600 - **Selling expenses:** $12,600 (Other data such as accounts receivable, cash, land, equipment are **not needed** for the income statement.) --- ## **Step 2: Calculate Cost of Goods Sold (COGS)** **Formula:** \[ \text{Cost of Goods Sold (COGS)} = \text{Finished Goods Inventory (Beginning)} + \text{Cost of Goods Manufactured} - \text{Finished Goods Inventory (Ending)} \] **Calculation:** \[ \text{COGS} = \$19,600 + \$40,600 - \$16,600 \] \[ \text{COGS} = \$60,200 - \$16,600 \] \[ \text{COGS} = \$43,600 \] --- ## **Step 3: Calculate Gross Profit** **Formula:** \[ \text{Gross Profit} = \text{Sales} - \text{COGS} \] **Calculation:** \[ \text{Gross Profit} = \$93,200 - \$43,600 \] \[ \text{Gross Profit} = \$49,600 \] --- ## **Step 4: Subtract Operating Expenses** **Operating Expenses:** - General and Administrative Expenses: $14,600 - Selling Expenses: $12,600 **Total Operating Expenses:** \[ \text{Total Operating Expenses} = \$14,600 + \$12,600 = \$27,200 \] --- ## **Step 5: Calculate Net Income** **Formula:** \[ \text{Net Income} = \text{Gross Profit} - \text{Total Operating Expenses} \] **Calculation:** \[ \text{Net Income} = \$49,600 - \$27,200 \] \[ \text{Net Income} = \$22,400 \] --- ## **Step 6: Prepare the Income Statement** ### **REX MANUFACTURING** ### **Income Statement for Year Ended December 31** | Particulars | Amount (\$) | |-----------------------------------------------|-------------| | Sales | 93,200 | | Less: Cost of Goods Sold | (43,600) | | **Gross Profit** | 49,600 | | Less: General and Administrative Expenses | (14,600) | | Less: Selling Expenses | (12,600) | | **Net Income** | 22,400 | --- ## **Final Answer** **The net income for Rex Manufacturing for the year ended December 31 is \$22,400.** This value was calculated by subtracting the cost of goods sold and total operating expenses from total sales.

# Explanation of Each Step ## Step 1: Organize Available Data In this step, we gathered all relevant financial information necessary to prepare the income statement. We focused on sales, beginning and ending inventories, cost of goods manufactured, and operating expenses. Additional financial data such as accounts receivable and cash were excluded as they are not pertinent to the income statement. ## Step 2: Calculate Cost of Goods Sold (COGS) We calculated the cost of goods sold using the beginning inventory, cost of goods manufactured, and ending inventory. This calculation helps determine the direct costs attributed to the production of goods sold during the year, which is essential for assessing profitability. ## Step 3: Calculate Gross Profit Gross profit was determined by subtracting the COGS from total sales. This figure represents the revenue remaining after accounting for the costs of goods sold, providing insight into the efficiency of production and sales activities. ## Step 4: Subtract Operating Expenses We totaled the operating expenses, which include general and administrative expenses and selling expenses. This step is crucial as it reflects the costs incurred in running the business, excluding the direct costs of producing goods. ## Step 5: Calculate Net Income Net income was calculated by subtracting the total operating expenses from gross profit. This figure indicates the company's overall profitability after all expenses have been accounted for, providing a clear picture of financial performance for the year. ## Step 6: Prepare the Income Statement Finally, we compiled all calculated figures into a structured income statement format. This document summarizes the financial performance of Rex Manufacturing, displaying sales, expenses, and net income clearly and concisely for stakeholders' review.