Chapter 6, Problem 4P

Selected accounts from Dence’s Gourmet Shop’s adjusted trial balance as of March 31, 2014, the end of the current fiscal year, follow. The merchandise inventory for Dence’s was $81,222 at the beginning of the year and $76,664 at the end of the year.

REQUIRED

1. 1. Prepare a multistep income statement for Dence’s. Store Salaries Expense, Advertising Expense, Store Supplies Expense, and Depreciation Expense—Store Equipment are selling expenses. The other expenses are general and administrative expenses. The company uses the periodic inventory system. Show details of net sales and operating expenses.
2. 2. BUSINESS APPLICATION ▶ Based on your knowledge at this point in the course, how would you use Dence’s income statement to evaluate the company’s profitability? What other financial statements should you consider, and why?