Montana Company Reported the Following Operating Results for Year 1

question 70

Essay

Montana Company reported the following operating results for Year 1 and Year 2: $\begin{array}{|l|l|l|}\hline 2013 & \text { Amount }&\% \text { of Sales }\\\hline \text { Sales } & \underline {\$ 800,000} \\\hline \text { Cost of goods sold } & \underline {440,000} \\\hline \text { Gross margin } & 360,000 \\\hline \text { Operating expenses } & \underline {225,000} \\\hline \text { Income before taxes } &135,000 \\\hline \text { Income taxes } & \underline { 40,000 } \\\hline \text { Net income } & \underline { \$ 95,000} \\\hline\end{array}$

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Definitions:

Assets

Resources owned or controlled by a company, expected to produce future economic benefits.

Equity

The value of an ownership interest in property, including shareholders' equity in a business.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Inventory Turnover

An activity ratio that measures the liquidity of the firm’s inventory—how quickly goods are sold and replenished.