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Income Statements and Profitability Ratios

In this assignment, you will use this information to create an income statement and then analyze it for profitability. Selected accounts for Jackson, Inc. are listed below along with their balances before closing the year of 12/31/12. Jackson, Inc. is a firm that manufactures wireless mouse systems for laptops. Use this information to complete the required elements below.
Interest expense $ 2,000
Sales revenue 297,000
Selling expenses 38,200

Administrative expenses 16,700
Cost of goods sold 162,300
Dividends1 12,200

Gain on sale of equipment 3,600
Loss from fire 7,500
Retained Earnings (1/1/12 balance) 335,000
Tax expense 22,800

The current syllabus cites a previous edition of the textbook. The attached update is correct for winter and spring—all current and upcoming terms.

1Dividends were declared and paid to Jackson, Inc. stockholders


On a spreadsheet, prepare a multistep Income Statement for the year ending 12/31/12 with proper heading. See link below for sample income statement. Near the bottom of your income statement should have a subtotal for Income before taxes and then subtract taxes to compute Net income. Net income should have a double underline.
On the same spreadsheet, prepare a Statement of Retained Earnings for the year ending 12/31/12 with proper heading. See link below for sample statement of retained earnings. There are no adjustments to retained earnings and ending retained earnings should have a double underline.
On the same spreadsheet, compute the gross profit margin, operating income margin, and net profit margin for 2012, showing the numerator and denominator for all ratios. Take ratios out to the nearest hundredth of a percentage (e.g., 33.33%).
On the same spreadsheet, write a paragraph analyzing each of the profitability ratios for Jackson, Inc. given the following information from previous years and competitors.

Gross profit margin Operating income margin Net profit margin
Jackson, 2011 47.22% 26.52% 17.75%
Jackson, 2010 48.87% 25.43% 17.03%
Competitor, 2012 43.22% 31.20% 21.14%

The following links provide sample formatting for income statements and statements of retained earnings.

Submit your spreadsheet

Solution Preview

You will find in attachment a dynamic Excel file showing the given date in one sheet and the suggested solution in the second one.
Given data are organized in such ...

Solution Summary

Solution is prepared using a dynamic Excel file. Given data are organized in such way they could be directly used to build the required financial statements. Income statement is prepared under multistep method. Subtotals are shown clearly. The retained earnings statement is also presented. Computation of profitability ratios is done using a matrix shown numerators, denominators and detailed calculation. All amounts are calculated using Excel formula so that you can see where numbers come from. The spreadsheet provides also profitability cross company and trend analysis.