[milagros86]

Please, I need help with this problem. Thanks!

In 2008, Walter Payton Company had net sales of $900,000 and cost of goods sold of
$540,000. Operating expenses were $230,000, and interest expense was $11,000. Payton prepares a multiple-step income statement.

Instructions
a) Compute Payton's gross profit.
b) Compute the gross profit rate. Why is this rate computed by financial statement users?
c) What is Payton's income from operations and net income?
d) If Payton prepared a single-step income statement, what amount would it report for net
Income?
e) In what section of its classified balance sheet should Payton report merchandise inventory

[ROLCAM]

a) Compute Payton's gross profit.

GROSS PROFIT = 900,00 - 540,000 = $ 360,000
______________________________________
b) Compute the gross profit rate. Why is this rate computed by financial statement users?

(360,000/900,000)/100 = 4/10of 100 = 40%
This is known as the GROSS PROFIT MARGIN.
______________________________________
c) What is Payton's income from operations and net income?

1)Income from Operations = 360,000 - 230,000 = $130,000.
2)Net Income = 130,000 - 11,000 = $119,000

______________________________________
d) If Payton prepared a single-step income statement, what amount would it report for net
income?

NET INCOME = $119,000.

_____________________________________
e) In what section of its classified balance sheet should Payton report merchandise inventory?
Inventory is reported as part of the
CURRENT ASSETS.

[milagros86]

Thanks a lot!!