Merchandise Mavens Corporation sells goods throughout North America. One of its product lines has recently reported the following information to you at head office. Based on this information, you have become concerned that the company is experiencing difficulties selling the product.

Required:
1. Prepare a multistep income statement for internal reporting purposes, stopping at the gross profit subtotal. Use a separate column to report each year€™s results, similar to Exhibit 6.9.
2. Analyze the information to identify two observations that lead to your concern.

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Cost of Goods Sold Gross Sales Inventory Sales Returns and Allewances 2015 $375,000 400,000 56,410 10,000 2014 $358,000 400,000 34,000 2013 $334,000 400,000 29,425 2,000 3,000