Preparing an Income Statement and Computing the Gross Profit Percentage and Receivables Turnover Ratio with Discounts, Returns, and Bad Debts -Tungsten Company, Inc., sells heavy construction equipment. There are 10,000 shares of capital stock outstanding. The annual fiscal period ends on December 31. The following condensed trial balance was taken from the general ledger on December 31, 2011:
| Account Titles Don't use plagiarized sources. Get Your Custom Essay on the beginning balance in accounts receivable net was 16 000 compute the gross profit 555574 For $10/Page 0nly | Debit | Credit |
| Cash | $33,600 | |
| Accounts receivable (net) | 14,400 | |
| Inventory, ending | 52,000 | |
| Operational assets | 40,000 | |
| Accumulated depreciation | $16,800 | |
| Liabilities | 24,000 | |
| Capital stock | 72,000 | |
| Retained earnings, January 1, 2011 | 9,280 | |
| Sales revenue | 147,100 | |
| Sales returns and allowances | 5,600 | |
| Cost of goods sold | 78,400 | |
| Selling expense | 14,100 | |
| Administrative expense | 15,400 | |
| Bad debt expense | 1,600 | |
| Sales discounts | 6,400 | |
| Income tax expense | 7,680 | |
| Totals | $269,180 | $269,180 |
Required:
1. Beginning with the amount for net sales, prepare an income statement (showing both gross profit and income from operations). Treat sales discounts and sales returns and allowances as a contra-revenue.
2. The beginning balance in Accounts Receivable (net) was $16,000. Compute the gross profit percentage and receivables turnover ratio and explain their meaning.
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