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Homework answers / question archive / Suppose in its income statement for the year ended June 30, 2022, The Clorox Company reported the following condensed data (dollars in millions)
Suppose in its income statement for the year ended June 30, 2022, The Clorox Company reported the following condensed data (dollars in millions).
Salaries and wages expenses $ 460 Research and development expense $ 114
Depreciation expense 90 Income tax expense 362
Sales revenue 5,430 Loss on disposal of plant assets 46
Interest expense 161 Cost of goods sold 2,600
Advertising expense 499 Rent expense 105
Sales returns and allowances 230 Utilities expense 60
Assume a tax rate of 34%.
(a)make a multiple-step income statement. (Round answers to 0 decimal places, e.g. 15,222.)
(b)Calculate the gross profit rate and the profit margin. (Round answers to 1 decimal place, e.g. 15.2%.)
Gross profit rate %
Profit margin %
(c1) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 30%. (Hint: Increase both sales revenue and sales returns and allowances by 30%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)
Make a multiple-step income statement. (Round answers to 0 decimal places, e.g. 15,222.)
(c)Calculate the gross profit rate and the profit margin. (Round answers to 1 decimal place, e.g. 15.2%.)
Gross profit rate %
Profit margin %
1. Gross Profit rate
Gross Profit rate = Gross Profit / Net Sales * 100 |
Gross Profit rate = $2,600 / $5,200 * 100 = 50.0%
2. Profit Margin
Profit Margin = Net Income / Net Sales * 100 |
Profit Margin = $703 / $5,200 * 100 = 13.52%
Merits are the net income has been increased due to increase in 30% of sales and cost of goods sold. Whereas the gross profit rate has been remained same in both the statement whereas the profit margin has been increased.
1. Gross Profit rate
Gross Profit rate = Gross Profit / Net Sales * 100 |
Gross Profit rate = $3,380 / $6,760 * 100 = 50.0%
2. Profit Margin
Profit Margin = Net Income / Net Sales * 100 |
Profit Margin = $993 / $6,760
* 100 = 14.7%