Emily€™s Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. 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 and rounding to one decimal place).

Transcribed Image Text:

EMILY'S GREENHOUSE CORPORATION Profit and Loss December 31 Credit $504.000 Debit Sales Cost of Goods Sold Sales Returns and Allowances Sales Discounts Salaries and Wages Expense Office Expense Travel Expenses Income Tax Expense Net Profit 311.000 1.000 8,000 61,000 13.000 3,000 18,000 79,000 $504,000 Totals 504,000