Jan Lorange manages Poppa Rollo€™s Pizza, Inc., which has prospered during its second year of operation. In order to help her decide whether to open another pizzeria, Lorange has prepared the current income statement of the business. Lorange read in an industry trade journal that a successful two-year-old pizzeria meets the following criteria:
a. Gross profit percentage is at least 60%.
b. Net income is at least $90,000.
Lorange believes the business meets both criteria. She intends to go ahead with the expansion plan and asks your advice on preparing the income statement in accordance with generally accepted accounting principles. When you point out that the statement includes errors, Lorange assures you that all amounts are correct. But some items are listed in the wrong place.
Requirement
1. Prepare a multi-step income statement and make a recommendation about whether Lorange should undertake theexpansion.

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POPPA ROLLO'S PIZZA, INC. Income Statement Year Ended December 31, 2014 Sales revenue $195,000 Gain on sale of land Total revenue Cost of goods sold Gross profit Operating expenses: Salary expense 24,600 219,600 85,200 134,400 35,600 6,000 Interest expense Depreciation expense Utilities expense Total operating expense Income from operations Other revenue: 4,800 3,700 50,100 84,300 Sales returns 10,700 $ 95,000 Net income