Mitch Hopkins owns the Happy Valley Drug Store, which has prospered during its second year of operation. To help Hopkins decide whether to open another pharmacy in the area, his bookkeeper has prepared the current income statement of the business.

Hopkins recently read in an industry trade journal that a successful two-year-old pharmacy meets these criteria:
a. Gross margin is at least 50 percent.
b. Net income is at least $150,000.
Basing his opinion on the entity's income statement data, Hopkins believes the business meets both criteria. He plans to go ahead with the expansion plan and asks your advice on preparing the pharmacy's income statement in accordance with generally accepted accounting principles. When you point out that the income statement includes errors, Hopkins assures you that all amounts are correct.
Required
Prepare a correct multi-step income statement and make a recommendation about whether to undertake the expansion at this time.

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HAPPY VALLEY DRUG STORE Income Statement For the Year Ended December 31,2017 Sales revenue Interest revenue Total revenue Cost of goods sold Gross margin Operating expenses: $740,000 30,000 770,000 348,000 422,000 Salary expense Rent expense Amortization expense Interest expense Utilities expense Supplies expense $127,000 32,000 24,500 10,500 6,800 4,000 Total operating expenses Income from operations Other revenues: 204,800 217,200 35,000 Sales discounts ($11,000) and returns ($24,000) Net income