The owner of a local souvenir shop in Garden City Beach is in the process of pre

Question

The owner of a local souvenir shop in Garden City Beach is in the process of preparing an income statement at the end of the first year of operation. Because it is the first year of operation, there was no inventory at the beginning of the year. Given below is certain financial information for the period.
Merchandise Inventory- year-end $25,000
Purchases $120,000
Freight -in $5,000
Sales $225,000
Property Taxes - Store $10,000
Depreciation - Store $20,000
Insurance - Store $8,000
Salary - Sales Staff $20,000
Advertising $6,000

In an attempt to evaluate how well she is doing she would like to calculate her Gross Profit or Margin for the year. Sketching out an income statement may help you arrive at this value. What is the Gross Margin?

Explanation / Answer

Income statement

Particulars

$

$

Income statement

Particulars

$

$

Revenue: Gross sales $225,000 Less sales returns and allowences 0 Net sales 225,000 Cost of sales: Purchases 120,000 Fright-in 5,000 Ending inventory -25,000 Cost of goods sold 100,000 Gross profit 125,000 Depreciation 20,000 Insurance 8,000 Salaries 20,000 Advertising 6,000 54,000 Net income before taxes 71,000 Property taxes 10,000 Net income after taxes 61,000 Extraordinary losses 0 Net income 61,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.