Shown below are selected accounts from the adjusted trial balance of Hill Sporting Equipment, Inc., on September 30, 2011, the fiscal year-end. The company’s beginning merchandise inventory was $40,611, and ending merchandise inventory was $38,332.

REQUIRED

1. Prepare a multistep income statement for Hill Sporting Equipment, Inc. Store Salaries Expense, Advertising Expense, Store Supplies Expense, and Depreciation Expense—Store Equipment are selling expenses. The other expenses are general and administrative expenses. Hill Sporting Equipment uses the periodic inventory system. Show details of net sales and operating expenses.

2. Based on your knowledge at this point in the course, how would you use the income statement for Hill Sporting Equipment to evaluate the company’s profitability? What other financial statements should you consider and why?

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Hill Sporting Equipment, Inc. Partial Adjusted Trial Balance September 30, 2011 Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Freight-In Store Salaries Expense Office Salaries Expense Advertising Expense Rent Expense Insurance Expense Utilities Expense Store Supplies Expense Office Supplies Expense Depreciation Expense Store Equipment Depreciation Expense Office Equipment Income Taxes $220,456 S 9,125 110,593 15,119 5,039 52,775 13,250 10,100 7,500 1,100 9,380 232 407 900 925 2,500