Item a: The adjusted trial balance of Entity B included the following selected accounts:

Debit Credit

Sales Revenue $900,000

Sales Returns and Allowances $ 45,000

Sales Discounts 18,500

Cost of Goods Sold 376,425

Freight-Out 7,000

Advertising Expense 35,000

Interest Expense 22,000

Salaries and Wages Expense 125,000

Rent Expense 120,000

Depreciation Expense 12,000

Income tax expense 40,000

Dividend Revenue 45,000

Instructions

1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2023.

2. Calculate the profit margin and gross profit rate.

3. Suggest three ways that either the gross profit rate or profit margin might be increased.

Item b: Entity C sold Entity D $15,000 of merchandise, terms 2/10, net 30. Entity C paid $5,000 for the merchandise.

Instructions

1. Journalize the sale on Entity C's books.

2. If Entity D returned $3,000 of the merchandise, and paid for the remainder 9 days from the date of the sales invoice, how much did Entity D remit (pay) Entity C?