Income Statement For The Year Ended December 31, 2014

In Its Income Statement For The Year Ended December 31, 2014, Gavin Co

In its income statement for the year ended December 31, 2014, Gavin Company reported various financial data, including revenues, expenses, gains, and losses. These figures serve as the basis for analyzing the company's financial performance during that fiscal year and calculating net income, which provides insights into its profitability and operational efficiency.

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The income statement is a fundamental financial statement that summarizes a company's revenues, expenses, gains, and losses over a specific period, providing a comprehensive view of its profitability. For Gavin Co, the year-end data for 2014 reveals several key components crucial in understanding its financial health.

Starting with sales, Gavin Co reported sales revenue of $3,270,800. This figure represents the total income generated from the sale of goods or services before deducting any costs or expenses. Sales revenue is a primary indicator of business activity and market demand. Alongside sales, Gavin reported sales discounts totaling $236,800, which are reductions granted to customers, often for early payment or promotional reasons. Deducting sales discounts from gross sales would give net sales, which are used for further analysis.

The cost of goods sold (COGS) was reported at $1,460,760. COGS accounts for the direct costs attributable to the production of goods sold by the company. It includes costs such as raw materials, labor, and manufacturing expenses. Subtracting COGS from net sales yields gross profit, an important measure of production efficiency.

Gross profit, calculated as net sales minus COGS, amounts to ($3,034,000 - $236,800) - $1,460,760 = $1,574,440. This figure indicates the profitability of Gavin Co’s core operations before accounting for operating expenses and other income or expenses.

The operating expenses reported include salaries and wages expenses ($688,200), utilities expense ($162,800), depreciation expenses ($458,800), and other expenses. Salaries and wages are a significant portion of operational costs, reflecting staffing and payroll commitments. Utilities cover expenses related to electricity, water, and other essential services. Depreciation expenses of $458,800 reflect the allocation of the cost of long-term assets over their useful lives, acknowledging the wear and tear of plant and equipment.

Beyond operating expenses, Gavin Co reported an interest expense of $105,080 and interest revenue of $96,200. Interest expense represents the cost of borrowed funds, decreasing net income, while interest revenue stems from investments or loans made by the company, adding to net income.

An important non-operating loss was reported as a loss on disposal of plant assets amounting to $123,580. This loss typically results from the sale or retirement of long-term assets at an amount less than their book value and is deducted from operating income to derive net income.

Income tax expense of $37,000 was also reported. Tax expenses decrease the pre-tax income to arrive at the net income, which is the final measure of the company's profitability after all expenses and taxes.

To accurately determine Gavin Co's net income, the following calculation encapsulates all these figures:

  • Gross profit: $1,574,440
  • Less: Salaries and wages expenses: $688,200
  • Less: Utilities expense: $162,800
  • Less: Depreciation expenses: $458,800
  • Plus: Interest revenue: $96,200
  • Less: Interest expense: $105,080
  • Less: Loss on disposal of plant assets: $123,580

Calculating the operating income:

$1,574,440 (Gross profit) - $688,200 (Salaries and Wages) - $162,800 (Utilities) - $458,800 (Depreciation) = $264,640

Then, considering non-operating items:

Interest revenue: +$96,200

Interest expense: -$105,080

Loss on disposal: -$123,580

Pre-tax income calculation:

$264,640 + $96,200 - $105,080 - $123,580 = $132,180

Finally, subtracting income tax expense:

$132,180 - $37,000 = $95,180

Therefore, Gavin Co’s net income for the year ended December 31, 2014, is approximately $95,180. This figure reflects the company's profitability after accounting for all operational expenses, non-operating items, and taxes.

References

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