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Merchandising Activities Chapter 6 Problem 6.2B Harry's Haberdashery is a retail clothing store for men. The store operates out of a rented building in Taipei. Shown below is the store's adjusted year-end trial balance dated 31 December 2013 (dollar amounts are stated in thousands). Pr of In LO HARRY'S HABERDASHERY Adjusted Trial Balance 31 December 2013 Cash Accounts receivable Inventory Prepaid rent Office supplies Office equipment $ 39,270 4,400 29,700 3,100 1,500 70,000 $ 20,000 22,000 5,000 31,000 36,000 384,000 Accumulated depreciation: office equipment Accounts payable Sales taxes payable Ordinary shares Retained earnings Sales Sales returns and allowances Cost of goods sold Purchase discounts lost Utilities expense Office supply expense Depreciation expense: office equipment Rent expense Insurance expense Salaries expense Income tax expense 4,000 157,630 400 7,000 900 4,700 10.000 1,500 150,000 13,900 $498,000 $498,000 c. Instructions a. Prepare an income statement for Harry's Haberdashery dated 31 December 2013. b. Compute the store's gross profit margin as a percentage of net sales. Do the store's customers seem to be satisfied with their purchases? Defend your answer. d. Explain how you can tell that the business records inventory purchases net of any purchase discounts. The store reports sales taxes payable of $5 million in its adjusted trial balance. Explain why it does not report any sales taxes expense. f. What is meant by the term operating cycle and which accounts in the trial balance comprise Harry's Haberdashery's operating cycle? e

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