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Answer :
Morgan Company's gross profit is $384 million and its operating profit is $284 million. The company's taxes are $80 million, and its net income is $120 million.
Determining Gross and Operating Profit
To calculate the gross profit for Morgan Company, we subtract the operating costs except depreciation and amortization from the net sales.
Thus, gross profit equals $3,000 million - $2,616 million = $384 million.
Next, to calculate the operating profit, also known as Earnings Before Interest and Taxes (EBIT), we subtract the depreciation and amortization expenses from the gross profit, which is $384 million - $100 million = $284 million.
Determining Taxes and Net Income
The taxes are calculated as 40% of the taxable income (EBT), which is 40% of $200 million = $80 million.
The net income is then calculated by subtracting the taxes from the taxable income, resulting in $200 million - $80 million = $120 million.
Question:
13. The income statement for Morgan Company is as follows (in millions of dollars); Morgan Company Income statement For the Year Ended December 31, 2010 Net Sales $3,000 Operating costs except depreciation and amortization $2,616 Gross Profit Depreciation and amortization $100 EBIT or operating profit Interest expenses $84 Taxable income (EBT) $200 Taxes (40%) Net Income Using the previous information, Morgan company's gross profit is..., and its operating profit is..... a. $284 and $384 respectively. b. $384 and $284 respectively. c. $200 and 284 respectively. d. none of the above. 14. Using the information in question #13, Morgan Company's taxes are .... and its net income is...... a. $80 and $120 respectively. b. $200 and $120 respectively. C. $80 and $200 respectively. d. none of the above.
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