50. The following is a listing of all of the income statement accounts for Mulbe

Question

50. 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. (use 4 column paper) spts $12,000 89,000 Advertising Expense Cost of Goods Sold Delivery Expense Insarance Expense Income Tax Expense Reat Expense 1,000 2,000 12,000 5,000 160,000 11,000 19,000 Interest Expense Sales Revenue Sales Discounts Sales Returns& Allowances Required: Part a. Prepare a multistep income statement. Part b. Compute the gross profit percentage

Explanation / Answer

MULTI-STEP INCOME STATEMENT

Explanation

Results shown in bold figures indicate each stage of the multi - stage income statement. After geting the gross profit, we consider operating expenses and show them under two different categories...... (1) selling and (2) adminstrative.

Interest expenses are considered as non operating, since it not necessary that every business should have interest to operate it.

Income tax is a seperate entry not mixed with operating and non operating scheme. It is shown seperately and deducted from profits before tax.

Profit from discontinued business and extraordinary items is not given in the question, but for the purpose of fomat presentation we show them with zero values.

Part - b

Gross profit percentage = Gross profit / Net sales * 100 = 41000 / 130000 * 100 = 31.54%

Sales Revenue 160000 (-) Sales returns and allowances -19000 (-) Sales discounts -11000 Net sales 130000 Cost of goods sold 89000 Gross profit 41000 Operating expenses     Selling expenses Advertising expenses 12000 Delivery expense 6000     Administrative expenses Insurance expenses 1000 Rent expenses 12000 Total Operating expenses 31000 Operating Income 10000 Non Operating expenses Interest Expenses 5000 Total Non Operating expenses 5000 Income before Income tax 5000 Income tax expenses 2000 Income from continuing Operations 3000 Income from discontinuing Operations 0 Extraordinary items 0 Net Income 3000

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