Question

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Psymon Company, Inc., sells construction equipment. The annual fiscal period ends on December 31. The following adjusted trial balance was created from the general ledger accounts on December 31:

Account Titles	Debits				Credits
Cash	$	55,690
Accounts Receivable		23,200
Inventory		84,500
Property and Equipment		63,000
Accumulated Depreciation					$	26,500
Accounts Payable						39,100
Common Stock						116,000
Retained Earnings, January 1						14,200
Sales Revenue						221,600
Cost of Goods Sold		129,200
Salaries and Wages Expense		22,200
Office Expenses		23,200
Interest Expense		3,300
Income Tax Expense		13,110
Totals	$	417,400			$	417,400

1. Prepare a multistep income statement that would be used for external reporting purposes. TIP: Some of the accounts listed will appear on the balance sheet rather than the income statement.

2. Compute the gross profit percentage

Answer 1

Income statement
January 1 -December 31
	$	$
Sales		$ 221,600.00
Cost of Goods sold		$ 129,200.00
Gross profit		$92,400.00
Operating expenses
Total Operating Expenses		$             -
Operating Income		$ 92,400.00
Non- Operating Expenses
Salaries and Wages	$ 22,200.00
Office expenses	$ 23,200.00
Interest Expenses	$    3,300.00
Total Non- Operating Expenses		$ 48,700.00
Income before Tax		$ 43,700.00
Income Tax Expense		$ 13,110.00
Net income		$ 30,590.00

Gross profit Percentage
Formula is (Gross profit/ Sales)
Gross profit Percentage          =	41.70%

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