Tungsten Company, Inc., sells heavy construction equipment. There are 10,000 shares of capital stock outstanding. The annual fiscal period ends on December 31. The following condensed trial balance was taken from the general ledger on December 31, 2014:

  

      

 Required:
 
1. Beginning with the amount for net sales, prepare an income statement (showing both gross profit and income from operations). Treat sales discounts and sales returns and allowances as a contra-revenue.

2. The beginning balance in Accounts Receivable (net) was $16,000. Compute the receivables turnover ratio and explain its meaning.

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Account Titles Cash Accounts receivable (net) Inventory, ending Operational assets Accumulated depreciation Liabilities Capital stock Retained earnings, January 1, 2014 Sales revenue Sales retums and allowances Cost of goods sold Selling expense Administrative expense Bad debt expense Sales discounts Income tax expense Totals Debit $ 33,600 14,400 52,000 40,000 5,600 78,400 14,100 15,400 1,600 6,400 7,680 $269,180 Credit $ 16,800 24,000 72,000 9,280 147,100 $269,180 Account Titles Cash Accounts receivable (net) Inventory, ending Operational assets Accumulated depreciation Liabilities Capital stock Retained earnings, January 1, 2014 Sales revenue Sales retums and allowances Cost of goods sold Selling expense Administrative expense Bad debt expense Sales discounts Income tax expense Totals Debit $ 33,600 14,400 52,000 40,000 5,600 78,400 14,100 15,400 1,600 6,400 7,680 $269,180 Credit $ 16,800 24,000 72,000 9,280 147,100 $269,180