"3. a. Kevin Bacon and Pork Company had sales of $240,000 and cost of goods sold of$108,000. What is the gross profit margin (ratio of gross profit to sales)? b. If the average firm in the pork industry had a gross profit of 60 percent, how is thefirm doing?2-3. Solution:Kevin Bacon and Port Companya. Sales $240,000 Cost of goods sold 180,000Gross profit$132,000 Gross profit $132,000 = 55%Sales240,000 b. With a gross profit 55 percent, the firm is under-performingthe industry average of 60 percent.S2-6 4. Arrange the following income statement items so they are in the proper order of an incomestatement:Taxes Earnings per shareShares outstanding Earnings before taxesGross profit shares outstanding Cost of goods soldInterest expense Earnings after taxesDepreciation expense Earnings available to commonPreferred stock dividends stockholdersOperating profit Selling and administrative expenseSalesGross profit2-4. Solution: Sales -Cost of goods sold Gross profit -Selling and administrative expense -Depreciation expense Operating profit -Interest expense Earnings before taxes -Taxes Earnings after taxes -Preferred stock dividends Earnings available to common stockholders Shares outstanding Earnings per shareS2-7 5. Given the following information, prepare, in good form, an income statement for GoodmanSoftware, Inc.Selling and administrative expense ........................................ $50,000Depreciation expense ............................................................. 80,000Sales ....................................................................................... 400,000Interest expense ...................................................................... 30,000Cost of goods sold .................................................................. 150,000Taxes ...................................................................................... 18,5502-5. Solution:Goodman Software, Inc.Sales ............................................................... $ 400,000Cost of goods sold .........................................150,000Gross Profit ............................................... 250,000Selling and administrative expense ............... 50,000Depreciation expense .....................................80,000Operating profit ......................................... 120,000Interest expense .............................................30,000Earnings before taxes ................................ 90,000Taxes ..............................................................18,550Earnings after taxes ................................... $ 71,450S2-8 6. Given the following information prepare in good form an income statement for the KidRock and Gravel Company.Selling and administrative expense ........................................ $ 60,000Depreciation expense ............................................................. 70,000Sales ....................................................................................... 470,000Interest expense ...................................................................... 40,000Cost of goods sold .................................................................. 140,000Taxes ...................................................................................... 45,0002-6. Solution:Kid Rock and Gravel Co.Income StatementSales ............................................................... $ 470,000Cost of goods sold ......................................... $ 140,000Gross profit................................................ $ 330,000Selling and administrative expense ............... $ 60,000Depreciation expense ..................................... $ 70,000Operating profit ......................................... $ 200,000Interest expense ............................................. $ 40,000Earnings before taxes ................................ $ 160,000Taxes .............................................................. $ 45,000Earnings after taxes ................................... $ 115,000S2-9 7. Prepare in good form an income statement for Virginia Slim Wear. Take your calculationsall the way to computing earnings per share.Sales ....................................................................................... $600,000Shares outstanding ................................................................. 100,000Cost of goods sold .................................................................. 200,000Interest expense ...................................................................... 30,000Selling and administrative expense ........................................ 40,000Depreciation expense ............................................................. 20,000Preferred stock dividends ....................................................... 80,000Taxes ...................................................................................... 100,0002-7. Solution:Virginia Slim WearIncome StatementSales ............................................................... $600,000Cost of goods sold ......................................... 200,000Gross profit................................................ 400,000Selling and administrative expense ............... 40,000Depreciation expense ..................................... 20,000Operating profit ......................................... 340,000Interest expense ............................................. 30,000Earnings before taxes ................................ 310,000Taxes .............................................................. 100,000Earnings after taxes ................................... 210,000Preferred stock dividends .............................. 80,000Earnings available to common stockholders . 130,000Shares outstanding ......................................... 100,000Earnings per share .......................................... $ 1.30S2-10 "