Answer:
(a) Multi-step income statement that would be used for internal reporting purposes
Sales Revenue 217,400
Less Cost of Goods Sold (126,800)
Gross Profit 90,600
Less Operating Expenses
Salaries and Wages Expense 21,800
Office Expenses 22,800 (44,600)
Operating Income 46,000
Less Non Operating Expenses
Interest Expense (3,200)
Net Income Before Tax 42,800
Income Tax Expense (12,840)
Net Income After Tax 29,960
(b) Multi step income statement that would be used for external reporting purposes
Sales Revenue 217,400
Less Cost of Goods Sold (126,800)
Gross Profit 90,600
Less Operating Expenses
Salaries and Wages Expense 21,800
Office Expenses 22,800 (44,600)
Operating Income 46,000
Less Non Operating Expenses
Interest Expense (3,200)
Net Income Before Tax 42,800
Income Tax Expense (12,840)
Net Income After Tax 29,960
(c) the gross profit percentage is 41.67%
Explanation:
Internal Reports versus External Reports
Internal reports do not have to conform to any Accounting Standards,However External reports have to confirm and be prepared according to accounting standards for Fair Representation and Comparability purposes
Gross Profit Percentage
Gross Profit Percentage = Gross Profit / Sales × 100
= 90,600/ 217,400 × 100
= 41.67%
