ACCT 203 Lecture Notes - Lecture 5: Gross Margin, Gross Profit, Income Statement

Todrick Company is a merchandiser that reported the following information based on 1,000 units sold:

2. Prepare a traditional format income statement.

E4-9 Multiple-step income statement:

In October 31, 20Y5, the balances of the accounts appearing inthe ledger of Quality Interiors Company, a furniture wholwsaler,are as follows:

Administrative expenses $600,000 Office supplies $5,000

building $2,000,000 retained earnings $903,000

capital stock $300,000 salaries payable $12,000

cash $175,000 sales $5,000,000

cost of merchandise sold $2,500,000 Sales discounts $400,000

dividends $20,000 sales returns and allowances $100,000

interest expense $50,000 selling expenses $850,000

merchandise inventory $400,000 store supplies $15,000

notes payable $900,000

Instructions:

a. Prepare a multiple-step income statement forthe year ended October 31, 20Y5.

b. Compare the major advantages anddisadvantages of the multiple-step and single-step forms.

Income statement for merchandiser:

For the fiscal year, sales were $12,140,000, sales discountswere $250,000, sales returns and allowances were $80,000, and costof merchandise sold was $7,000,000.

Instructions:

a. What was the amount of net sales?

b. What was the amount of gross profit?

Problem 1-19 Traditional and Contribution Format IncomeStatements [LO1-6]

Todrick Company is a merchandiser that reported the followinginformation based on 1,000 units sold:

Required:

1. Prepare a contribution format income statement.

2. Prepare a traditional format income statement.

3. Calculate the selling price per unit.

4. Calculate the variable cost per unit.

5. Calculate the contribution margin per unit.

6. Which income statement format (traditional format orcontribution format) would be more useful to managers in estimatinghow net operating income will change in responses to changes inunit sales?

Prepare a contribution format income statement.