The adjusted trial balance of McCoy Company included the following selected acco
ID: 2420043 • Letter: T
Question
The adjusted trial balance of McCoy Company included the following selected accounts:
Debit Credit
Sales Revenue 645,000
Sales Returns and Allowances 50,000
Cost of Goods Sold 396,000
Freight-Out 2,000
Advertising Expense 15,000
Interest Expense 19,000
Salaries and Wages Expense 84,000
Utilities Expense 23,000
Depreciation Expense 3,500
Interest Revenue 25,000
Sales Discount 9,500
Income Tax Expense 15,000
Use the above information to prepare a multi-step income statement for the year ended December 31, 2014.
Calculate the profit margin and gross profit rate
Explanation / Answer
McCoy Company
Income statement
for the year ended December 31, 2014.
Direct income
Sales Revenue
645000
Less- Sales discount
9500
Less- Sales Returns and Allowances
50000
585500
Cost of Goods Sold
396000
Gross profit
199000
Indirect income
Interest Revenue
25000
Less- Selling expense
Freight-Out
2000
Advertising Expense
15000
17000
Less- General and Administrative expense
Salaries and Wages Expense
84000
Utilities Expense
23000
Depreciation Expense
3500
110500
Less- other
Interest Expense
19000
19000
Income before tax
77500
Less- tax
15000
Net Income
62500
Gross profit margin = gross profit/ net sales * 100
=( 199000 / 585500) *100
=34 %
Proft margin = Net income / net sales * 100
= (62500 / 585500) *100
= 10.67%
McCoy Company
Income statement
for the year ended December 31, 2014.
Direct income
Sales Revenue
645000
Less- Sales discount
9500
Less- Sales Returns and Allowances
50000
585500
Cost of Goods Sold
396000
Gross profit
199000
Indirect income
Interest Revenue
25000
Less- Selling expense
Freight-Out
2000
Advertising Expense
15000
17000
Less- General and Administrative expense
Salaries and Wages Expense
84000
Utilities Expense
23000
Depreciation Expense
3500
110500
Less- other
Interest Expense
19000
19000
Income before tax
77500
Less- tax
15000
Net Income
62500
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