Presented below is the adjusted trial balance of Katie's Pet Supplies as at its fiscal year end, June 30, 2021. All accounts are their normal balance (debit or credit). Katie's uses the perpetual inventory system.

Accounts payable .......................$ 34,850 K. Milani, capital .....................$ 50,770

Accounts receivable ....................27,300 K. Milani, drawings .................24,000

Accum. depreciation, computers1,500 Long-term note receivable ......14,000

Accum. depreciation, equipment32,000 Merchandise inventory ...........55,000

Advertising expense ................... 3,200 Note payable, due 2022 .........47,000

Cash ........................................... 9,500 Prepaid rent ............................1,500

Computers ..................................4,500 Rent expense .........................14,000

Cost of goods sold ......................195,000 Salaries expense ....................46,800

Depreciation expense ................. 4,000 Salaries payable .....................6,200

Equipment ...................................80,000 Sales discounts ......................100

Freight out ...................................6,200 Sales returns and allowances1,000

Insurance expense .....................2,200 Sales revenue ........................320,000

Interest expense ......................... 2,350 Supplies ..................................900

Interest payable ..........................280 Supplies expense ...................1,750

Interest revenue ..........................700

a)Prepare multiple-step income statement.

b)Calculate Katie's gross profit margin. Katie's gross profit margin for 2020 was 45%. Comment on the change in gross profit margin from the prior year.