Accounts payable Accounts receivable $30,000
Interest revenue 20,000 $960
Accumulated depreciation- Merchandise inventory 57,440
equipment Notes payable 26,720 36,000
Cash Notes receivable 12,525 32,000
Cost of goods sold Rent expense 569,680 16,000
Depreciation expense Sales 6,680 703,360
Equipment Sales discounts 66,800 3,700
Freight out Sales returns and allowances 14,440 4,720
Insurance expense Supplies expense 2,895 5,840
Interest expense Unearned revenue 6,040 2,160
Interest receivable V.Wolcott, capital 72,680 240
V.Wolcott, drawings 60,640
Additional information:
1. All adjustments have been recorded and posted except for the inventory adjustment. According to the inventory count, the company has $55,000 of merchandise on hand.
2. Last year Wolcott Warehouse Store had a gross profit margin of 20% and a profit margin of 10%.
Instructions:
a) Prepare any additional required adjusting entries.
(b) Prepare a single-step income statement.
c) Prepare a multiple-step income statement.
(d) Calculate gross profit margin and profit margin. Compare with last year's margins and comment on the results.
(e) Prepare the closing entries. Post to the Income Summary account. Before closing the Income Summary account, check that the balance is equal to profit.
TAKING IT FURTHER
Compare the two income statements and comment on the usefulness of each one.
