Question

The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31.

Advertising Expense		$10,600
Cost of Goods Sold		87,300
Delivery Expense		4,100
Insurance Expense		1,400
Income Tax Expense		7,320
Rent Expense		10,100
Interest Expense		1,300
Sales Revenue		160,400
Sales Discounts		10,100
Sales Returns & Allowances		17,200

Required:

1. Prepare a multistep income statement.
2. Compute the gross profit percentage.

Answer 1

a.

Mulberry Street Sportswear
Income Statement
December 31,
Revenues
Sales revenue		160,400
Less:
Sales return and allowance	-17,200
Sales discount	-10,100
		-27,300
Net Sales		133,100
Cost of goods sold		-87,300
Gross profit		45,800
Operating expenses:
Advertising Expense	-10,600
Delivery Expense	-4,100
Insurance expense	-1,400
Rent expense	-10,100
Total Operating expenses		-26,200
Operating Profit		19,600
Other expenses:
Interest expense	-1,300
		-1,300
Profit before tax		18,300
Income tax expense		-7,320
Net Income		$10,980

b.

Gross profit percentage = Gross profit / Net Sales

= 45,800/133,100

= 34.41%

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