Emily's Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. The greenhouse is in an excellent location, and sales have increased each year. At the end of 2014, the bookkeeper prepared the following statement (assume that all amounts are correct, but note the incorrect terminology and format):

Required:
1. Prepare a properly formatted multistep income statement that would be used for internal reporting purposes. Treat Sales Returns and Allowances and Sales Discounts as contra-revenue accounts.
2. Prepare a properly formatted multistep income statement that would be used for external reporting purposes, beginning with the amount for Net Sales.
3. Compute and interpret the gross profit percentage (using the formula shown in this chapter).

Transcribed Image Text:

EMILY'S GREENHOUSE CORPORATION Profit and Loss December 31, 2014 Debit Credit Sales Cost of Goods Sold Sales Returns and Allowances Sales Discounts Selling Expense Administrative Expense General Expenses Income Tax Expense Net Profit $504,000 $311,000 11,000 8,000 61,000 18,000 79,000 Totals