Chapter 9, Problem 5PA

Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values.

A. In the correct format, prepare the income statement using the following information:

B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital.

C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.