The following summarized data were provided by the records of Slate, Incorporated, for the year ended December 31, 2010:
Sales of merchandise for cash ………………………………$223,000
Sales of merchandise on credit ……………………………… 40,000
Cost of goods sold ………………………………………….. 143,000
Selling expense ……………………………………………… 45,200
Administrative expense ……………………………………… 20,000
Sales returns and allowances ………………………………… 8,000
Items not included in above amounts:
Estimated bad debt loss, 3% of credit sales
Average income tax rate, 30%
Number of shares of common stock outstanding 4,000
Required:
1. Based on these data, prepare an income statement (showing both gross profit and income from operations). Include a percentage analysis column.
2. What was the amount of gross profit margin? What was the gross profit percentage ratio? Explain what these two amounts mean.