Question

Using the Adjusted Trial Balance for merchandising company, perform the following tasks:

1. Prepare an Income Statement in multiple-step format with subtotals for net sales, gross profit, income before taxes, and net income. (20 points)

2. Calculate Gross Profit Margin. (5 points)

Tower Corporation Adjusted Trial Balance

at 31 December 2019

                                                              Debit               Credit

Cash                                                       7,590            

Accounts Receivable                              5,910

Merchandise Inventory                            4,870

Prepaid Insurance                                   2,550            

Equipment                                            25,230            

Accumulated Depreciation: Equipment                           450

Accounts Payable                                                        4,230

Capital Stock                                                               24,690

Retained Earnings, January 1, 2019                            5,550

Dividends                                               1,150            

Sales revenue                                                              48,150

Sales returns                                             740

Cost of Goods Sold                               17,000

Salaries Expense                                   8,850            

Utilities Expense                                     2,130            

Rent Expense                                        3,390

Depreciation Expense                                450

Interest Expense                                        230

Income Tax Expense                              2,980             ______

                                                              €83,070           €83,070

Answer 1

Tower Corporation
Multistep Income Statement
For the year ended 31 December 2019
Sales		48,150
Less Sales Returns and Allowances		740
Net Sales		47,410
Cost of goods Sold		17,000
Gross Margin		30,410
Operating Expenses
Salaries Expense	8,850
Utilites Expense	2,130
Rent Expense	3,390
Depreaciation Expense	450
Total Operating Expenses		14,820
Income From Operations		15,590
Other Revenue/ (Expenses)
Interest Expense		(230)
Income Before Taxes		15,360
Income Tax Expenses		2,980
Net Income		12,380

Gross Profit Margin=Gross Profit /Net Sales

=30410/47410

=64.143%