Problem 6.2A (Algo) Preparation and Interpretation of a Merchandising Company's Income Statement (LO6-1, LO6-2, LO6-3, LO6-6, LO6-8)

Hendrys Boutique is a retail clothing store for women. The store operates out of a rented building in Storm Lake, Iowa. The following is the stores adjusted year-end trial balance dated December 31, current year.

HENDRY'S BOUTIQUE
Adjusted Trial Balance
December 31, current year
Cash	$	20,040
Accounts receivable		3,600
Merchandise inventory		27,000
Prepaid rent		2,760
Office supplies		1,800
Office equipment		52,800
Accumulated depreciation: office equipment					$	15,600
Accounts payable						16,500
Sales taxes payable						4,080
Capital stock						24,000
Retained earnings						22,715
Sales						297,600
Sales returns and allowances		3,100
Cost of goods sold		126,635
Purchase discounts lost		900
Utilities expense		6,408
Office supply expense		1,008
Depreciation expense: office equipment		4,500
Rent expense		8,040
Insurance expense		1,370
Salaries expense		109,242
Income taxes expense		11,292
	$	380,495			$	380,495

Required:

a. Prepare an income statement for Hendrys Boutique dated December 31, current year.

b. Compute the stores gross profit margin as a percentage of net sales.

c. Do the stores customers seem to be satisfied with their purchases?

f. Which accounts appearing in the stores adjusted trial balance comprise its operating cycle?