Final answer:
To create the income statement for Magio Company, we subtract the cost of goods sold ($489,000) and operating expenses ($245,000) from the sales revenue ($985,000), resulting in a net income of $251,000 for the year ending 2019.
Step-by-step explanation:
The student has provided information necessary for creating an income statement, which is a financial document that summarizes revenues, costs, and expenses incurred during a specific period, in this case, the year 2019. To construct an income statement for Magio Company, you start by listing the sales revenue, then subtract the cost of goods sold (COGS) to find the gross profit. After that, you subtract operating expenses from the gross profit to determine the net income.
Magio Company's net income for the year ending 2019 is $251,000, determined by subtracting the cost of goods sold and operating expenses from sales revenue.
To begin, the sales revenue of $985,000 is the total amount generated from the sale of kitchen equipment. From this, we subtract the cost of goods sold, which is $489,000. The cost of goods sold includes the direct costs attributable to the production of the goods sold by a company. The result after subtracting COGS from sales revenue is the gross profit, which in this case is $985,000 - $489,000 = $496,000. Next, operating expenses of $245,000, which consist of costs required to run the company that are not directly tied to the production of the product, such as office supplies, utilities, and salaries for non-production staff, are subtracted from the gross profit. Thus, the net income is calculated as $496,000 - $245,000 = $251,000. The net income reflects the actual profitability of the company after accounting for all the costs and expenses.