Chapter 5, Problem 5.12E

(a)

To determine

Gross Profit: Gross profit is that profit which is computed by deducting Cost of goods sold from the net sales (sales after deducting sales return and allowances, sales discounts).

To determine: Gross profit

(b)

To determine

Gross Profit Rate: It is the financial ratio that evaluates the money left out of the total revenues after deducting the cost of goods sold. Thus, it shows the relationship between the gross profit on sales and net sales.

To determine: Gross profit rate

(c)

To determine

Income from operations: Income from operations refers to that income which is the result of deducting operating expenses from the gross profit of the company. It is calculated in the one of the steps of the multi-step income statement.

Net Income: Net income refers to the actual profit of the company. It can be calculated by deducting total expenses from total revenue of the company.

To determine: Income from operations and Net Income

(d)

To determine

Single Step Income Statement: A single step income statement refers to the simplest form of the income statement which has only one step for calculating net income, subtract total expense from total revenues. All data is separated in only two parts- revenues and expenses.

To determine: Single step income statement

(e)

To determine

Classified Balance Sheet: It is a financial statement where the assets, liabilities, and stockholders’ equity are organized and reported as different groups, and sub-groups on the basis of the nature of the classification made of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as the statement of financial position. It helps the users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities.

To determine: Inventory in classified balance sheet of the L Company.