The data below are selected accounts from the adjusted trial balance of Dan's Sports Equipment on September 30, 20x7, the fiscal year end. The company's beginning merchandise inventory was $81,222 and ending merchandise inventory is $76,664 for the period.
Dan's Sports Equipment
Partial Adjusted Trial Balance
September 30, 20 × 7
Sales .............................................................. $433,912
Sales Returns and Allowances ..................... $ 11,250
Purchases .............................................. 221,185
Purchases Returns and Allowances ........................... 30,238
Freight-In .................................................... 10,078
Store Salaries Expense .................................... 107,550
Office Salaries Expense .................................... 26,500
Advertising Expense ....................................... 18,200
Rent Expense ............................................... 14,400
Insurance Expense ........................................... 2,800
Utilities Expense .......................................... 18,760
Store Supplies Expense ....................................... 464
Office Supplies Expense ..................................... 814
Depreciation Expense-Store Equipment ................. 1,800
Depreciation Expense-Office Equipment ............... 1,850
Required
1. Prepare a multistep income statement for Dan's Sports Equipment. 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 periodic inventory system. Show details of net sales and operating expenses.
2. User Insight: Based on your knowledge at this point in the course, how would you use the income statement for Dan's Sports Equipment to evaluate the company's profitability? What other financial statements should you consider and why?