Analyzing Gross Profit Percentage on the Basis of an Income Statement – The following summarized data were provided by the records of Slate, Incorporated, for the year ended December 31, 2012:
|
Sales of merchandise for cash |
$233,000 |
|
Sales of merchandise on credit |
40,000 |
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Cost of goods sold |
146,000 |
|
Selling expense |
47,200 |
|
Administrative expense |
20,000 |
|
Sales returns and allowances |
8,000 |
|
Items not included in above amounts: |
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Estimated bad debt loss, 3% of credit sales |
|
|
Average income tax rate, 30% |
|
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Number of shares of common stock outstanding, 4,500 |
Required:
1. Based on these data, prepare an income statement (showing both gross profit and income from operations).
2. What was the amount of gross profit margin? What was the gross profit percentage ratio? Explain what these two amounts mean.