Meaghan Mirkle owns the Unicorn Day Spa, which has prospered during its second year of operation. To help Mirkle decide whether to open another spa in the area, her bookkeeper has prepared the current income statement of the business.

Mirkle recently read in an industry trade journal that a successful 2-year-old spa meets these criteria:

a. Gross margin is at least 48.7 percent.

b. Net income is at least $150,000. Basing her opinion on the entity’s income statement data, Mirkle believes the business meets both criteria. She plans to go ahead with the expansion plan and asks your advice. When you point out that the income statement includes errors, Mirkle asks you to prepare a corrected statement prior to analyzing the results.

Required 

Prepare a correct multi-step income statement and make a recommendation about whether to undertake the expansion at this time.

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Sales revenue Interest revenue Total revenue Cost of goods sold Gross margin Operating expenses Salaries expense Rent expense UNICORN DAY SPA Income Statement For the Year Ended December 31, 2023 Amortization expense Interest expense Utilities expense Supplies expense Total operating expenses Income from operations Other revenues Sales discounts ($11,000) and returns ($24,000) Net income $127,000 32,000 24,500 10,500 6,800 4,000 $740,000 30,000 770,000 348,000 422,000 204,800 217,200 35,000 $252,200