Harry's Haberdashery is a retail clothing store for men. The store operates out of a rented building in Albertsville, Virginia. Shown as follows is the store's adjusted year-end trial balance dated December 31, current year.

Instructions
a. Prepare an income statement for Harry's Haberdashery dated December 31, current year.
b. Compute the store's gross profit margin as a percentage of net sales.
c. Do the store's customers seem to be satisfied with their purchases? Defend your answer.
d. Explain how you can tell that the business records inventory purchases net of any purchase discounts.
e. The store reports sales taxes payable of $6,000 in its adjusted trial balance. Explain why it does not report any sales taxes expense.
f. What is meant by the term operating cycle, and which accounts in the trial balance comprise Harry's Haberdashery's operating cycle?

Transcribed Image Text:

HARRY'S HABERDASHERY ADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR 5,280 35,640 3,720 1,800 84,000 $24,000 26,400 6,000 37,200 43,200 460,800 4,800 189,156 480 8,400 1,080 5,640 12,000 1,800 180,000 16,680 Sales returns and allowances .. ._. . .. ._. .. . . . .. . . . . .. .. . . .. .. $597,600 $597,600