Shown below are selected accounts from the adjusted trial balance of Joseph’s Video Store, Inc., at the end of the fiscal year, June 30, 2011.

REQUIRED

1. Prepare a multistep income statement for Joseph’s Video Store, Inc. Freight-In should be combined with Cost of Goods Sold. 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. Based on your knowledge at this point in the course, how would you use the income statement for Joseph’s Video Store to evaluate the company’s profitability? What other financial statement should you consider and why?

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Joseph's Video Store, Inc. Partial Adjusted Trial Balance June 30, 2011 Sales Sales Returns and Allowances Cost of Goods Sold Freight-In Store Salaries Expense Office Salaries Expense Advertising Expense Rent Expense Insurance Expense Utilities Expense Store Supplies Expense Office Supplies Expense Depreciation Expense Store Equipment Depreciation Expense Office Equipment Income Taxes $870,824 $ 25,500 442,370 20,156 216,700 53,000 36,400 28,000 5,600 18,320 3,328 3,628 3,600 3,700 5,000