Problem

Analyzing GrossProfit Percentage on the Basis of an Income StatementThe following summariz...

Analyzing GrossProfit Percentage on the Basis of an Income Statement

The following summarized data were provided by the records of Slate, Incorporated, for the year ended December 3 1, 20 12:

Sales of merchandise for cash

$233,000

Sales of merchandise on credit

40,000

Cost of goods sold

146,000

Selling expense

47,200

Administrative expense

20,000

Sales returns and allowances

8,000

Items not included in above amounts:

 

     Estimated bad debt loss, 3% of credit sales

 

     Average income tax rate, 30%

 

     Number of shares of common stock outstanding.48.88

 

Required:

I. Based on these data, prepare an income statement (showing both gross profit and income from operations).

2. What was the amount of gross profit margin? What was the gross profit percentage ratio? Explain what these two amount s mean.

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