Builders Company. Inc., sells heavy construction equipment. There are 10.000 shares of capital stock outstanding. The annual fiscal period ends on December 3 1 . The following condensed trial balance was taken from the general ledger on December 3 1 , 2006:

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

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Account Titles Cash Accounts receivable Inventory, ending Accumulated depreciation Operational assets Liabilities Capital stock Sales revenue Retained earnings. January 1, 2006 Sales returns and allowances Cost of goods sold Selling expense Administrative expense Bad debt expense Sales discounts Income tax expense Totals Debit $ 42,000 Credit 18.000 65,000 50,000 $ 21,000 30.000 90.000 11.600 182.000 7.000 98.000 17,000 18.000 2.000 8.000 9.600 $334.600 $334.600