The income statement for Forklift Electrical Ltd for two years are shown below: Forklift Electrical LtdIncome Statement Comparison Current yearPrior year (amounts in thousands)amounts in thousands)Sales$ 33,750$ 24,750Cost of goods sold21,93816,830Gross profit$ 11,812$ 7,920 Wages $ 8,775$ 6,188Utilities675250Repairs169325Selling506200Total expenses $ 10,125$ 6,963 Total assets (investment base)$ 4,500$ 1,500 Required:a) Determine the operating income (loss) (dollars) for each year.b) The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the amounts of the total assets as the investment base, calculate the return on investment.c) Was the decision to invest additional assets in the company successful? Explain.

Income statement of a firm presents the revenue income and expenses related to the reported period.…

Answered: The income statement for Forklift…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The income statement for Forklift Electrical Ltd for two years are shown below:

Forklift Electrical Ltd

Income Statement Comparison

	Current year	Prior year
	(amounts in thousands)	amounts in thousands)
Sales	$ 33,750	$ 24,750
Cost of goods sold	21,938	16,830
Gross profit	$ 11,812	$ 7,920

Wages	$ 8,775	$ 6,188
Utilities	675	250
Repairs	169	325
Selling	506	200
Total expenses	$ 10,125	$ 6,963

Total assets (investment base)	$ 4,500	$ 1,500

Required:

a) Determine the operating income (loss) (dollars) for each year.
b) The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the amounts of the total assets as the investment base, calculate the return on investment.
c) Was the decision to invest additional assets in the company successful? Explain.

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