Wolcott Warehouse Store has an August 31 fiscal year end and uses a perpetual inventory system and the earnings approach. An alphabetical list of its account balances at August 31, 2021, follows. All accounts have normal balances.

Additional information:1. All adjustments have been recorded and posted except for the inventory adjustment. According to the inventory count, the company has $54,700 of merchandise on hand.

2. Last year Wolcott Warehouse Store had a gross profit margin of 20% and a profit margin of 9%.

Instructions

a. Prepare any additional required adjusting entries and update account balances.

b. Prepare a single-step income statement.

c. Calculate gross profit margin and profit margin. Compare with last year?s margins and comment on the results. (Hint: You will have to calculate the gross profit amount separately.)

d. Prepare the closing entries. Post to the Income Summary account. Before closing the Income Summary account, check that the balance is equal to profit.

Taking It Further What would a company do if it wanted to improve gross profit margin and profit margin?

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Accounts payable Interest revenue $ 29,500 19,000 26,280 11,000 575,500 6,570 65,700 4,600 2,900 2,000 260 2$ 57,000 38,990 33,000 15,500 960 Accounts receivable Accumulated depreciation-equipment Merchandise inventory Notes payable Notes receivable Rent expense Cash Cost of goods sold Depreciation expense Equipment Freight out Insurance expense Interest expense Interest receivable 704,000 Sales discounts Sales returns and allowances Supplies expense Unearned revenue V. Wolcott, capital V. Wolcott, drawings 14,700 5,600 5,900 72,200 61,200