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ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income

Kestrel Co has the following figures for the year ended 31 December: revenue $900,000; cost of sales $540,000; distribution costs $70,000; administrative expenses $110,000; investment income $12,000; finance costs $22,000; income tax expense $40,000. What is the profit for the year?

Profit for the year is $130,000. Gross profit of $360,000 less operating expenses of $180,000, plus investment income of $12,000 and less finance costs of $22,000 gives $170,000 before tax. Deducting the income tax expense of $40,000 leaves $130,000.

  1. A$130,000Correct
  2. B$140,000
  3. C$170,000
  4. D$118,000

Explanation

Gross profit = 900,000 - 540,000 = 360,000. Less distribution 70,000 and administration 110,000 = 180,000 operating profit. Add investment income 12,000 = 192,000, less finance costs 22,000 = 170,000 profit before tax. Less tax 40,000 = 130,000. The figure 170,000 is profit before tax, which ignores the tax charge.

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