Preparation and Interpretation of a Merchandisign Company’s income statement
Hendry's Boutique is a retail clothing store for women. The store operates out of a rented building in Storm Lake, Iowa. Shown below is the store's adjusted year-end trial balance dated December 31,2011.
ADJUSTED TRIAL BALANCE DECEMBER 31 , 2011 | ||
Cash | $ 15,200 |
|
Accounts receivable | 2,600 |
|
Merchandise inventory | 17,500 |
|
Prepaid rent | 1,800 |
|
Office supplies | 900 |
|
Office equipment | 41,000 |
|
Accumulated depreciation: office equipment |
| $ 12,000 |
Accounts payable |
| 12,750 |
Sales taxes payable |
| 3,200 |
Capital stock |
| 18,000 |
Retained earnings |
| 21 ,050 |
Sales |
| 226,000 |
Sales returns and allowances | 2,500 |
|
Cost of goods sold | 100,575 |
|
Purchase discounts lost | *250 |
|
Utilities expense | 4,120 |
|
Office supply expense | 520 |
|
Depreciation expense: office equipment | 2,750 |
|
Rent expense | 6,100 |
|
Insurance expense |
| 900 |
Salaries expense | 88,095 |
|
Income taxes expense | 8,190 |
|
| $293,000 | $293,000 |
Instructions
a. Prepare an income statement for Hendry's Boutique dated December 31,2011.
b. Compute the store's gross profit margin as a percentage of net sales.
c. Do the store's customers seem to be satisfied with their purchases? Defend your answer.
d. Explain how you can tell that the business records inventory purchases net of any purchase discounts.
e. The store reports sales taxes payable of $3,200 in its adjusted trial balance. Explain why it does not report any sales taxes expense.
f. Which accounts appearing in the store's adjusted trial balance comprise its operating cyclel
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