Q25E - Horngren'S Financial And Managerial Accounting

Question

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:

Step-by-Step Solution

Answer

The gross profit of the Quality Office is $128,150.

Step 1: Meaning of Gross Profit

In accounting, gross profit refers to the amount of profit left with a business concern after recovering all the costs associated with the production/manufacturing and sale of goods. Such a cost is the cost of goods sold, which considers direct and indirect expenses associated with the production process. 

Step 2: Preparation of multi-step income statement

QUALITY OFFICE SYSTEMS
Multi-step Income Statement
For the year ended March 31, 2018
Particulars	Amounts ($)
Sales revenue	235,700
Less: Cost of goods sold	(107,550)
Gross profit	128,150
Less: Operating expenses
Selling expenses	(27,400)
Administrative expenses	(14,200)
Income from operations	86,550
Less: Other expenses
Interest expenses	(2,800)
Net income	$83,750