Big Tommy Corporation is a local grocery store organized seven years ago as a corporation. At that time, 6,000 shares of common stock were issued to the three organizers. The store is in an excellent location, and sales have increased each year. At the end of 2009, the bookkeeper prepared the following statement (assume that all amounts are correct; note the incorrect terminology and format):

Required: 1. Beginning with the amount of net sales, prepare a multiple-step income statement (showing both gross profit and income from operations). Treat sales discounts as an expense. 2. Compute the gross profit percentage and explain its meaning.

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BIG TOMMY CORPORATION Profit and Loss December 31, 2009 Debit Credit Sales $420.000 Cost of goods sold $279.000 Sales returns and allowances 10.000 Selling expense 58,000 Administrative and general expense 16,000 Bad debt expense 1,000 Sales discounts 6.000 Income tax expense 15,000 Net profit Totals 35,000 $420.000 $420.000