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To prepare the income statement for 20XY based on the information provided, we'll follow these steps:

### Step-by-Step Approach:
1. **Sales**: $314,000
2. **Cost of Goods Sold (COGS)**: 70% of sales
3. **Gross Profit**: Sales minus COGS
4. **Operating Expenses**:
   - **Amortization Expense**: 10% of net plant and equipment (based on Dec 31, 20XX balance sheet).
   - **Selling & Administrative Expenses**: Given as $31,100.
5. **Operating Income**: Gross profit minus operating expenses.
6. **Interest Expense**:
   - **Interest on Bonds Payable**: 19% of bonds payable balance (from Dec 31, 20XX).
   - **Interest on Notes Payable**: 17% of notes payable balance (from Dec 31, 20XX).
7. **Income Before Tax**: Operating income minus total interest expense.
8. **Income Tax Expense**: 18% of income before tax.
9. **Net Income**: Income before tax minus income tax.

I'll start by computing each of these values.

### 1. **Cost of Goods Sold (COGS)**
\[
\text{COGS} = 0.70 \times 314,000 = 219,800
\]

### 2. **Gross Profit**:
\[
\text{Gross Profit} = 314,000 - 219,800 = 94,200
\]

### 3. **Amortization Expense**:
- **Net Plant and Equipment** at the beginning of 20XY: $253,800 (from Dec 31, 20XX).
\[
\text{Amortization Expense} = 0.10 \times 253,800 = 25,380
\]

### 4. **Operating Expenses**:
- Given **Selling & Administrative Expenses**: $31,100.
\[
\text{Total Operating Expenses} = 25,380 + 31,100 = 56,480
\]

### 5. **Operating Income**:
\[
\text{Operating Income} = 94,200 - 56,480 = 37,720
\]

### 6. **Interest Expense**:
- **Interest on Bonds Payable** (from Dec 31, 20XX): Bonds Payable = $55,100.
\[
\text{Interest on Bonds Payable} = 0.19 \times 55,100 = 10,469
\]
- **Interest on Notes Payable** (from Dec 31, 20XX): Notes Payable = $25,600.
\[
\text{Interest on Notes Payable} = 0.17 \times 25,600 = 4,352
\]
- **Total Interest Expense**:
\[
\text{Total Interest Expense} = 10,469 + 4,352 = 14,821
\]

### 7. **Income Before Tax**:
\[
\text{Income Before Tax} = 37,720 - 14,821 = 22,899
\]

### 8. **Income Tax Expense**:
- Tax rate = 18%.
\[
\text{Income Tax Expense} = 0.18 \times 22,899 = 4,122
\]

### 9. **Net Income**:
\[
\text{Net Income} = 22,899 - 4,122 = 18,777
\]

### Summary of the Income Statement:
- **Sales**: $314,000
- **COGS**: $219,800
- **Gross Profit**: $94,200
- **Operating Expenses**: $56,480
- **Operating Income**: $37,720
- **Interest Expense**: $14,821
- **Income Before Tax**: $22,899
- **Income Tax Expense**: $4,122
- **Net Income**: $18,777

Let me know if you'd like any further clarifications or details.

---

**Related Questions**:
1. What is the formula for calculating gross profit margin?
2. How do operating expenses impact the profitability of a company?
3. What are the implications of high interest expenses on financial performance?
4. How does amortization expense affect the overall profitability of a business?
5. How is income tax calculated based on different income brackets?

**Tip**: Always ensure all interest rates and balances are properly matched to their corresponding period to avoid miscalculations in financial reporting.

Prepare an income statement for the year ending December 31, 20XY based on the balance sheet and sales data provided in the image.

Learn how to prepare an income statement for the year ending December 31, 20XY using detailed sales, cost of goods sold, and amortization expense data. This problem covers financial accounting concepts and is ideal for undergraduate accounting students.

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