Harrys Haberdashery is a retail clothing store for men. The store operates out of a rented building

Harry’s Haberdashery is a retail clothing store for men. The store operates out of a rented building in Albertsville, Virginia. Shown below is the store’s adjusted year-end trial balance dated December 31, 2011.

Instructions
a. Prepare an income statement for Harry’s Haberdashery dated December 31, 2011.
b. Compute the store’s gross profit margin as a percentage of net sales.
c. Do the store’s customers seem to be satisfied with their purchases? Defend your answer.
d. Explain how you can tell that the business records inventory purchases net of any purchase discounts.
e. The store reports sales taxes payable of $5,000 in its adjusted trial balance. Explain why it does not report any sales taxes expense.
f. What is meant by the term “operating cycle” and which accounts in the trial balance comprise Harry’s Haberdashery’s operatingcycle?

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HARRY'S HABERDASHERY ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 39,270 4,400 29,700 3,100 1,500 70,000 Cash Merchandise inventory. Prepaid rent Office supplies Office equipment. Accounts payable ····· Sales taxes payable . Capital stock Hetained earnings Sales . Sales retums and allowances. 20,000 22,000 5,000 31,000 36,000 384,000 4,000 157,630 400 7,000 900 4,700 10,000 1,500 150,000 13,900 Cost of goods sold . . . . Purchase discounts lostT . . . Utilities expense. Office supply expense Depreciation expense: office equipment Rent expense Insurance expense . Salaries expense .. Income tax expense . . . . $498,000 $498,000