Calculate and interpret the meaning of the gross profit

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Reference no: EM13492272

Shown below is summarized data for a company for the year end December 31.

 

Sales of merchandise for cash

$58,250

Sales of merchandise on credit

10,000

Cost of goods sold

36,500

Selling expense

11,800

Administrative expenses

5,000

Sales returns and allowances

2,000

Items not included in the above amounts:


    Estimated bad debt loss, 2% of credit sales


    Average income tax rate, 20%


    Number of shares of common stock outstanding, 2,000


 

Based on the data, prepare an income statement that shows both gross profit and income from operations. Include the earnings per share. Calculate and interpret the meaning of the gross profit percentage ratio.

 

Reference no: EM13492272

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