Chapter 5, Problem 5.12E

To determine

Gross Profit: Gross profit is that profit which is computed by deducting Cost of goods sold from the net sales (Sales after deducting Sales Return and allowances, Sales Discounts).

Gross Profit Rate: It is the financial ratio that evaluates the money left out of the total revenues after deducting the cost of goods sold. Thus, it shows the relationship between the gross profit on sales and net sales

Income from operations: Income from operations refers to that income which is the result of deducting operating expenses from the gross profit of the company. It is calculated in as one of the steps of the multi-step income statement

Net Income: Net Income refers to the actual profit of the Company. It is calculated by deducting total expenses from total revenue of the Company.

Single step income statement: A single step income statement refers to the simplest form of the income statement which has only one step for calculating net income, subtract total expense from total revenues. All data is separated in only two parts- Revenues and Expenses

Classified Balance Sheet: It is a financial statement where the assets, liabilities, and stockholders’ equity are organized and reported as different groups, and sub-groups on the basis of the nature of the classification made of a company at a particular point of time. It reveals the financial health of a company.

(a) Gross profit, (b) Gross profit rate, (c) Income from operations and Net Income, (d) Single step income statement, and (e) Inventory in classified balance sheet of the M C Company.