Question

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The following data were provided by Mystery Incorporated for the year ended December 31:

Cost of Goods Sold	$	162,000
Income Tax Expense		16,880
Merchandise Sales (gross revenue) for Cash		234,000
Merchandise Sales (gross revenue) on Credit		40,800
Office Expenses		18,700
Sales Returns and Allowances		6,870
Salaries and Wages Expense		39,000

Required:

1. Prepare a multistep income statement.

2-a. What was the amount of gross profit?

2-b. What was the gross profit percentage? (Round your percentage to 1 decimal place.)

2-c. Did the gross profit percentage in the current year improve, or decline, relative to the 37% gross profit percentage in the prior year?

Answer 1

1. Prepare a multistep income statement.

Sales (234000+40800)		274800
Less: Sales return and allowance		-6870
Net Sales		267930
Less: Cost of goods sold		162000
Gross profit		105930
Less: Operting expense
Salaries and Wages Expense	39000
Office Expenses	18700
Total expense		57700
Income before tax		48230
Income tax expense		16880
Net income		31350

2a) Gross profit = 105930

2b) Gross profit percentage = 105930*100/267930 = 39.5%

2c) Gross profit percentage in the current year is improved