Reference no: EM132755148

Question -

A. Suppose in its income statement for the year ended June 30, 2022, The Clorox Company reported the following condensed data (dollars in millions).

Salaries and wages expenses $460

Research and development expense $114

Depreciation expense 90

Income tax expense 328

Sales revenue 5,230

Loss on disposal of plant assets 46

Interest expense 161

Cost of goods sold 2,500

Advertising expense 499

Rent expense 105

Sales returns and allowances 230

Utilities expense 60

Assume a tax rate of 34%.

Required -

(a) Prepare multiple-step income statement.

(b) Calculate the gross profit rate and the profit margin.

B. Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)

Required -

(a) Prepare multiple-step income statement.

(b) Calculate the gross profit rate and the profit margin.