Final answer:
To record H & H Tool, Inc's income statement for the year ended December 31, 2021, you need to list all revenues, subtract the cost of goods sold, include all operating expenses, list non-operating items, calculate pre-tax income, subtract taxes, and arrive at the net income. The income statement should be well-formatted, with major categories and totals clearly presented.
Step-by-step explanation:
To record an income statement for H & H Tool, Inc for the year ended December 31, 2021, you will need to begin by gathering all financial records that reflect the company's revenue and expenses throughout the year. The income statement is divided into several sections that reflect a company's financial performance.
Steps to Prepare an Income Statement:
List all revenue for the year, including sales or services provided. This is the top line of the income statement and is often referred to as gross revenue or sales.
Subtract Cost of Goods Sold (COGS), which includes the direct costs attributable to the production of the goods sold by the company, to arrive at the gross profit.
Include other operating expenses like salaries, utilities, and rent, to calculate operating income.
List non-operating income and expenses, such as interest income or expenses and one-time events.
Subtract all operating and non-operating expenses from the total revenue to determine pre-tax income.
Calculate the tax expense based on the applicable tax rate, and subtract it from pre-tax income.
The final amount after taxes is the net income, which is the bottom line of the income statement.
Make sure all numbers are accurate and categorized correctly. The income statement should be formatted in a way that is easy to read and understand, typically with revenues and expenses clearly separated and bolded totals for significant figures like gross profit, operating income, and net income.