Case 1:
Franco Furniture store is trying to find out the amount of net income or loss for its first year of operation. The Accountant Stacey has suddenly left the job. The owner is supplying you the following information which he has managed to find from the accounts of the business for current year ended 31 December:
Sales revenue (net) $113 040
Cost of goods sold 71 280
Accounts payable 3 200
Interest revenue 870
Cash at bank 32 000
Office supplies expense 720
Office Supplies in hand 200
Rent expense 2 160
Office salaries expense 4 800
Sales salaries expense 9 840
Interest expense 300
Office Equipment 27 000
Depreciation expense: office equipment $ 1 920
Shop Equipment 42 000
Depreciation expense: sales equipment 2 880
Required: Prepare an Income Statement for the current year showing Gross profit and Net profit of the furniture shop.
The owner is also concerned about the profitability of the business. Calculate the Gross Profit percentage. Comment on the gross profit performance of the business if the average gross profit margin for retail furniture business is 25%.
Calculate the Net Profit Margin. Would you be happy with this Net profit margin if it was your own business? Why?
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