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, 2024, 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 the 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.
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 for the year.

Taking It Further

What could a company do if it wanted to improve gross profit margin and profit margin?

Transcribed Image Text:

Accounts payable Accounts receivable Accumulated depreciation-equipment Cash Cost of goods sold Delivery expense Depreciation expense Equipment Insurance expense Interest expense Interest receivable Interest revenue $ 29,500 19,000 26,280 11,000 547,500 4,600 6,570 65,700 2,900 2,000 260 960 Merchandise inventory Notes payable Notes receivable Rent expense Salaries expense Sales Sales discounts Sales returns and allowances Supplies expense Unearned revenue V. Wolcott, capital V. Wolcott, drawings $ 57,000 38,990 33,000 15,500 28,000 704,000 3,300 14,700 5,600 5,900 72,200 61,200