Shown below is summarized data for a company for the year end December 31.
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Sales of merchandise for cash
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$58,250
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Sales of merchandise on credit
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10,000
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Cost of goods sold
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36,500
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Selling expense
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11,800
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Administrative expenses
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5,000
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Sales returns and allowances
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2,000
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Items not included in the above amounts:
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Estimated bad debt loss, 2% of credit sales
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Average income tax rate, 20%
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Number of shares of common stock outstanding, 2,000
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Based on the data, prepare an income statement that shows both gross profit and income from operations. Include the earnings per share. Calculate and interpret the meaning of the gross profit percentage ratio.