Wolcott Warehouse Store has an August 31 fiscal year end and uses a perpetual inventory system. An alphabetical list of its account balances at August 31, 2014, 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 $55,000 of merchandise on hand.
2. Last year Wolcott Warehouse Store had a gross profit margin of 20% and a profit margin of 10%.
Instructions
(a) Prepare any additional required adjusting entries.
(b) Prepare a single-step income statement.
(c) Prepare a multiple-step income statement.
(d) Calculate gross profit margin and profit margin. Compare with last year's margins and comment on the results.
(e) 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
Compare the two income statements and comment on the usefulness of each one.

Transcribed Image Text:

Accounts payable Accounts receivable Accumulated depreciation 30,000 Interest revenue Merchandise inventory Notes payable Notes receivable $ 960 equipment Cost of goods sold Depreciation expense Equipment Sales returns and allowances Insurance expense Interest expense Interest receivable Unearned revenue V. Wolcott, capital V. Wolcott, drawings