In this module, you were introduced to the income statement and profitability ratios. In this assignment, you will use this information to create an income statement and then analyze it for profitability. Selected accounts for Jackson, Inc. are listed below along with their balances before closing the year of 12/31/12. Jackson, Inc. is a firm that manufactures wireless mouse systems for laptops. Use this information to complete the required elements below.

Interest expense

2,000

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Sales revenue

297,000

Selling expenses

38,200

16,700

Cost of goods sold

162,300

Dividends1

12,200

Gain on sale of equipment

3,600

Loss from fire

7,500

Retained Earnings (1/1/12 balance)

335,000

Tax expense

22,800

1Dividends were declared and paid to Jackson, Inc. stockholders
Required:

1. On a spreadsheet, prepare a multistep income statement for the year ending 12/31/12 with proper heading. See link below for sample income statement. Near the bottom of your income statement should be a subtotal for income before taxes and then you should subtract taxes to compute net income. Net income should have a double underline.
2. On the same spreadsheet, prepare a statement of retained earnings for the year ending 12/31/12 with proper heading. See link below for sample statement of retained earnings. There are no adjustments to retained earnings and ending retained earnings should have a double underline.
3. On the same spreadsheet, compute the gross profit margin, operating income margin, and net profit margin for 2012, showing the numerator and denominator for all ratios. Take ratios out to the nearest hundredth of a percentage (e.g., 33.33%).
4. On the same spreadsheet, write a paragraph analyzing each of the profitability ratios for Jackson, Inc. given the following information from previous years and competitors.
 Gross profit margin Operating income margin Net profit margin Jackson, 2011 47.22% 26.52% 17.75% Jackson, 2010 48.87% 25.43% 17.03% Competitor, 2012 43.22% 31.20% 21.14%

The following links provide sample formatting for income statements and statements of retained earnings.