Reference no: EM13913324

Selected accounts from Dence's Gourmet Shop's adjusted trial balance as of March 31, 2014, the end of the current fiscal year, follow. The merchandise inventory for Dence's was $81,222 at the beginning of the year and $76,664 at the end of the year.

Dence's Gourmet shop partial Adjusted trial Balance March 31, 2014

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
Income Tax Expense	510

Required:

1. Prepare a multistep income statement for Dence's. Store Salaries Expense, Advertis- ing 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. Business application Based on your knowledge at this point in the course, how would you use Dence's income statement to evaluate the company's profitabil- ity? What other financial statements should you consider, and why?