Question

Lolas hair salon has the following account balances: Cost of goods sold $400,000 Rent expense $45,000 Depreciation expense 13,500 Salaries expense 56,000 Insurance expense 3,100 Sales 575,000 Interest expense 10,500 Sales discounts 5,400 Interest revenue 8,500 Sales returns and allowances 17,500 Assuming Chocolate Treats uses a multiple-step income statement, calculate the following:

- net sales,

- gross profit,

- operating expenses,

- profit from operations,

- profit.

Answer 1

(A). Net Sales

Sales $ 575,000

Less: Sales Return Allowances    $ 17,500

Less : Sales Discounts    $ 5,400

Net Sales   $ 552,100

(B) Gross Profit

Net Sales   $ 552,100

Less: Cost of Good Sold $ 400,000

Gross Profit $ 152,100

(C) Operating Expenses

Rent expense $ 45,000

Depreciation expense $ 13,500

Salaries expense $ 56,000

Insurance expense $ 3,100

Interest expense $ 10,500

Total operating Expenses $ 128,100

(D) Profit From Operations

Gross profit $ 152,100

Less: Total Operating Expenses $ 128,100

Profit From Operations    $ 24,000

(E) Net Profit

Profit From Operations $ 24,000

Add: Interest Income $ 8,500

Net Profit    $ 32,500

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