Quiz – Construct an Income Statement

In 2021, LOL Private Ltd. (a hardware retail company) sold 10,000 units of its product at an average price of $400 per unit. The company reported return goods in 2021 of $200,000.

LOL purchased 11,000 units of its product from its manufacturer in 2021 at an average cost of $300 per unit.

Operating expenses (excluding depreciation) for LOL, Inc. in 2021 were $400,000 and depreciation expenses were $100,000.

LOL had $2,000,000 in debt outstanding throughout all of 2021. This debt carried an average interest rate of 10%.

Finally, LOL’s tax rate was 25 percent.

LOL’s fiscal year runs from January 1 through December 31.

Given this information, construct LOL’s 2021 income statement.

Cost of goods sold
Gross profit
Operating expenses (excl. depreciation)
Depreciation expense
Operating income
Interest expense
Income Before Taxes
Income Taxes
Net income

Here is the answer of this exercise.

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