At the end of the fiscal year, August 31, 20x7, selected accounts from the adjusted trial balance for Mikhail's Patio Furniture were as follows:
Mikhail's Patio Furniture
Partial Adjusted Trial Balance
August 31, 20 × 7
Sales ....................................................................... $162,000
Sales Returns and Allowances ............................ $ 2,000
Cost of Goods Sold ........................................ 61,400
Freight-In .................................................... 2,300
Store Salaries Expense ..................................... 32,625
Office Salaries Expense .................................... 12,875
Advertising Expense ........................................ 24,300
Rent Expense ................................................. 2,400
Insurance Expense ........................................... 1,200
Utilities Expense .............................................. 1,560
Store Supplies Expense ...................................... 2,880
Office Supplies Expense ..................................... 1,175
Depreciation Expense-Store Equipment .................. 1,050
Depreciation Expense-Office Equipment .................. 800
Required
1. Using the information given, prepare a multistep income statement for Mikhail's Patio Furniture. Store Salaries Expense; Advertising Expense; Store Supplies Expense; and Depreciation Expense-Store Equipment are selling expenses. The other expenses are general and administrative expenses. The company uses the perpetual inventory system. Show details of net sales and operating expenses.
2. User Insight: Based on your knowledge at this point in the course, how would you use the income statement for Mikhail's Patio Furniture to evaluate the company's profitability? What other financial statement should be considered, and why?