Question

7. Given the following Balance Sheet
extract, calculate the net profit on the
Income Statement. (Assuming tax rate
= 10% of operating profit)
Balance Sheet Extract:
Shareholders Equity
Common Stock
200
25
Retained Earnings
Revenues
170
Cost of Sales
(103)
Salaries
(30)
Interest
(12)

Answer 1

The net profit on the Income Statement based on the balance sheet given will be 21.

How to calculate the net profit?

The net profit will be calculated thus:

Revenue = 170

Less coat of sales = 103

Less salaries= 30

Operating income = 30

Less interest = 12

Income before tax = 25

Less Income tax = (10% × 37) = 3.7

Net profit = 21.3 = 21

Therefore, the net profit on the Income Statement based on the balance sheet given will be 21.

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