31) An adjusted trial balance of Meadows Company as of December 31, 2019 is given below. Prepare a
multi-step income statement for the year for the company.
Debit
Credit
Cash
$15,000
Accounts Receivable
42,000
Merchandise Inventory
60,000
Supplies
15,000
Land
300,000
Accounts Payable
$3,000
Notes Payable
25,000
Common Stock
300,000
Retained Earnings
26,000
Dividends
3,000
Sales Revenue
465,000
Cost of Goods Sold
240,000
Salaries Expense
15,000
Utilities Expense
69,000
Rent Expense
54,000
Interest Expense
6,000
_______
Totals
$819,000
$819,000
32) An adjusted trial balance of Anders Retailers as of December 31, 2019 is given below. Prepare a single-
step income statement for the year for the company.
Debit
Credit
Cash
$15,000
Accounts Receivable
42,000
Merchandise Inventory
60,000
Supplies
15,000
Land
300,000
Accounts Payable
$3,000
Notes Payable
25,000
Common Stock
300,000
Retained Earnings
26,000
Dividends
3,000
Sales Revenue
465,000
Cost of Goods Sold
240,000
Salaries Expense
15,000
Utilities Expense
69,000
Rent Expense
54,000
Interest Expense
6,000
_______
Totals
$819,000
$819,000
33) Rogers Motorsports selected accounts as of December 31, 2018, follow:
Administrative Expenses
$130,000
Cost of Goods Sold
200,000
Interest Revenue
2,500
Net Sales Revenue
450,000
Selling Expenses
80,000
Prepare the multi-step income statement for the year ended December 31, 2018.
34) Briefly discuss what gross profit represents and how it affects the net earnings of a merchandiser.
35) A merchandiser’s statement of retained earnings looks exactly like that of a service business.
36) The balance sheet of a merchandiser looks the same as the balance sheet of a retailer, except
merchandisers have the following additional current liability accounts: Estimated Returns Inventory and
Refunds Payable.
37) Merchandise Inventory and Cost of Goods Sold appear ________.
A) on the balance sheet and statement of retained earnings, respectively
B) on the statement of retained earnings and income statement, respectively
C) on the balance sheet and income statement, respectively
D) on the income statement and statement of cash flows, respectively
38) On a balance sheet for a merchandiser, Merchandise Inventory is listed as a(n) ________.
A) current asset
B) current liability
C) expense
D) revenue
39) Which of the following is an account that is shown on the balance sheet for a merchandiser but not on
the balance sheet of a service business?
A) Unearned Revenue
B) Sales Discounts Forfeited
C) Estimated Returns Inventory
D) Cost of Goods Sold
1) The gross profit percentage measures the profitability of each sales dollar above the cost of goods sold.
2) A small increase in the gross profit percentage may indicate an important rise in income.
3) Gross profit percentage reflects a business’s ability to raise selling prices.
4) In general, to remain competitive in an industry, a low gross profit percentage is desired.
5) Which of the following is the correct formula for calculating gross profit percentage?
A) Net profit / Net sales revenue
B) Gross profit / Net sales revenue
C) Net sales revenue / Net profit
D) Net sales revenue / Gross profit
6) The gross profit percentage is one of the most carefully watched measures of ________.
A) profitability
B) liquidity
C) solvency
D) marketability
7) Which of the following is true of the gross profit percentage?
A) Gross profit percentage is the same for companies in all industries.
B) Gross profit percentage is used to measure the solvency of a company.
C) The gross profit percentage is one of the most carefully watched measures of profitability.
D) A service company must show its gross profit percentage in its income statement.
8) A company made net sales revenue of $500,000, and cost of goods sold totaled $300,000. Calculate its
gross profit percentage.
A) 40%
B) 60%
C) 125%
D) 325%
9) Carpenter, Inc. generated sales revenues of $1,400,000 in 2019. Its cost of goods sold amounted to
Calculate Carpenter’s gross profit percentage.
A) 40%
B) 60%
C) 167%
D) 250%
10) What does the gross profit percentage measure? How is it computed?
11) The gross profit percentage for Fran’s Clothing Retailer was 37.7% for the year ended December 31,
2018 and 42.5% for the year ended December 31, 2019. The industry average gross profit percentage, for
both years, is 45.7%. Briefly discuss these findings.
12) Bridgeport Enterprises reported the following figures from its adjusted trial balance for its first year of
business, which ended on June 30, 2019.
$4,800
3,600
1,400
3,800
4,500
7,550
23,500
2,000
8,500
150
2,500
35,000
1,500
1,700
Requirements:
a. Prepare a multi-step income statement.
b. Prepare the statement of retained earnings.
c. Prepare a classified balance sheet.
d. Compute the gross profit percentage.
b.