Question

The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. Prepare an income statement for the shop based on these estimates. The tax rate is 35%.

Answer 1

Answer and Explanation:

The preparation of the income statement is presented below:

Particulars Amount

Revenue $160,000

Less:

Rental Costs $30,000

Variable Costs $50,000

Depreciation $10,000

Profit before tax $70,000

Tax at 35% -$24,500

Net Income $45,500

Hence, the net income is $45,500