5e-8

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Exercise:           E5-8, Prepare multiple-step income statement and calculate
                      profitability ratios, File 5e-8
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In its income statement for the year ended December 31, 2007, Knitz Company reported the following condensed data.

                                 Administrative expenses                                  $435,000
                                 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?
Enter text answer here.




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