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Instructions a. Prepare an income statement for Hendry's Boutique dated December 31, 2011. b. Compute the store's gross profit margin as a percentage of net sales. c. Do the store's customers seem to be satisfied with their purchases? Defend your answer.

Instructions a. Prepare an income statement for Hendry's Boutique dated December 31, 2011. b. Compute the store's gross profit margin as a percentage of net sales. c. Do the store's customers seem to be satisfied with their purchases? Defend your answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PROBLEM 6.2A Hendry's Boutique is a retail clothing store for women. The store operates out of a rented building in Storm Lake, lowa. Shown below is the store's adjusted year-end trial balance dated December 31, 2011. HENDRY'S BOUTIQUE ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash .. $ 15,200 Accounts receivable 2,600 Merchandise inventory 17,500 Prepaid rent Office supplies Office equipment Accumulated depreciation: office equipment Accounts payable Sales taxes payable Capital stock Retained earnings Sales .... 1,800 900 41,000 $ 12,000 12,750 3,200 18,000 21,050 226,000 Sales returns and allowances 2,500 Cost of goods sold 100,575 Purchase discounts lost 250 Utilities expense Office supply expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Income taxes expense 4,120 520 2,750 6,100 900 88,095 8,190 $293,000 $293,000 Instructions a. Prepare an income statement for Hendry's Boutique dated December 31, 2011. b. Compute the store's gross profit margin as a percentage of net sales. Do the store's customers seem to be satisfied with their purchases? Defend your answer. c. d. Explain how you can tell that the business records inventory purchases net of any purchase discounts. The store reports sales taxes payable of $3,200 in its adjusted trial balance. Explain why it does not report any sales taxes expense. е. f. Which accounts appearing in the store's adjusted trial balance comprise its operating cycle?
Transcribed Image Text:PROBLEM 6.2A Hendry's Boutique is a retail clothing store for women. The store operates out of a rented building in Storm Lake, lowa. Shown below is the store's adjusted year-end trial balance dated December 31, 2011. HENDRY'S BOUTIQUE ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Cash .. $ 15,200 Accounts receivable 2,600 Merchandise inventory 17,500 Prepaid rent Office supplies Office equipment Accumulated depreciation: office equipment Accounts payable Sales taxes payable Capital stock Retained earnings Sales .... 1,800 900 41,000 $ 12,000 12,750 3,200 18,000 21,050 226,000 Sales returns and allowances 2,500 Cost of goods sold 100,575 Purchase discounts lost 250 Utilities expense Office supply expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Income taxes expense 4,120 520 2,750 6,100 900 88,095 8,190 $293,000 $293,000 Instructions a. Prepare an income statement for Hendry's Boutique dated December 31, 2011. b. Compute the store's gross profit margin as a percentage of net sales. Do the store's customers seem to be satisfied with their purchases? Defend your answer. c. d. Explain how you can tell that the business records inventory purchases net of any purchase discounts. The store reports sales taxes payable of $3,200 in its adjusted trial balance. Explain why it does not report any sales taxes expense. е. f. Which accounts appearing in the store's adjusted trial balance comprise its operating cycle?
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