Below Is a Comparative Income Statement for Joshua Company: Joshua

question 93

Multiple Choice

Below is a comparative income statement for Joshua Company: Joshua Company
Income Statement
For the Years Ended December 31,20X6 and 20X5
$\begin{array}{lrr}&20X6&20X5\\\text { Sales } & \$ 1,744 & \$ 1,562 \\\text { Less: Cost of goods sold } & 992 & 806 \\\text { Gross profit } & \$ 752 & \$ 756 \\\text { Less operating expenses: }\\\text { Wage expense } & \$ 172 & \$ 160 \\\text { Depreciation expense } & 28 & 26 \\\text { Rent expense } & 36 & 36 \\\text { Miscellaneous expense } & 40 & 70 \\\text { Total operating expenses } & \$ 276 & \$ 292\\\text { Operating income } & \$ 476 & \$ 464 \\\text { Less other expenses: } & & \\\quad \text { Interest } & 20 & 60\\\text { Income before tax } & \$ 456 & \$ 404 \\\text { Less: Income tax expense } & 182 & 162 \\\text { Net income } & \$ 274 & \$ 242\end{array}$ Identify the issue that would be of most concern or source of optimism to financial analysts of Joshua Company.

• A)Income taxes increased 12.3%.
• B)Wages expense was approximately 10% of sales.
• C)There was a 12.9% increase in income before taxes.
• D)There was a 23.1% increase in cost of goods sold with only an 11.7% increase in sales.

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Definitions:

Chapter 7

A provision under the U.S. Bankruptcy Code allowing individuals or businesses to liquidate their assets to pay off creditors as part of a bankruptcy proceeding.

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The act of preserving resources or assets and managing them responsibly for current and future use.

Chapter 11

A chapter of the U.S. Bankruptcy Code allowing a business to continue operations while reorganizing its debts under court supervision.