# 5e-8

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```					Name:
Exercise:           E5-8, Prepare multiple-step income statement and calculate
profitability ratios, File 5e-8
Course:
Date:

In its income statement for the year ended December 31, 2007, Knitz Company reported the following condensed data.

Selling expenses                                           690,000
Cost of goods sold                                         987,000
Loss on sale of equipment                                   83,500
Interest expense                                            68,000
Net sales                                                2,350,000
Interest revenue                                            45,000

Instructions
(a) Prepare a multiple-step income statement.

KNITZ COMPANY
Income Statement
December 31, 2007
Account Title                                              Amount
Account Title                                              Amount
Title                                                      Formula
Title
Account Title                           Amount
Account Title                           Amount           Formula
Title                                                      Formula
Title
Account Title                                             Amount
Title
Account Title                                            Amount
Title                                                      Formula

(b)(1) Calculate the profit margin ratio.
Title                                           Amount
=                                                  =        Formula
Title                                           Amount

(b)(2) Calculate the gross profit rate.
Title                                           Amount
=                                                  =        Formula
Title                                           Amount

(c) In 2006 Knitz had a profit margin ratio of 9%. Is the decline in 2007 a cause for concern?

129d9ef0-cd91-4c74-a8b6-e2cb2ceb78b4.xls, Page 1 of 3, 3/24/2012, 5:59 PM
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