JKL Enterprises has the following information:

• Opening Inventory: $70,000
• Purchases: $180,000
• Closing Inventory: $60,000
• Sales Revenue: $270,000
• Returns and Allowances: $25,000
• Sales Discounts: $10,000
• Operating Expenses: $80,000

Requirements:

1. Calculate the cost of goods sold.
2. Determine the gross profit.
3. Prepare the income statement.
4. Compute the operating income.
5. Analyze the effect of returns and allowances on net sales.