Valley Company\'s adjusted trial balance on August 31, 2017, its fiscal year-end

Question

Valley Company's adjusted trial balance on August 31, 2017, its fiscal year-end, follows. Debit $ 45,000 180,000 Credit Merchandise inventory Other (noninventory) assets Total liabilities K. Valley, Capital K. Valley, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Sales salaries expense Rent expense-Selling space Store supplies expense Advertising expense Office salaries expense Rent expense-Office space Office supplies expense Totals $ 51,975 146,529 8,000 307,800 4,709 20,315 118,387 42,169 14,467 3,694 26,163 38,475 3,694 S 506,304 506,304 On August 31, 2016, merchandise inventory was $36,315. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs. Invoice cost of merchandise purchases Purchases discounts received Purchases returns and allowances Costs of transportation-in $132,300 2,778 6,350 3,900 Required 1. Compute the company's net sales for the year 2. Compute the company's total cost of merchandise purchased for the year 3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses 4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses

Explanation / Answer

1)Net sales = sales - sales discount - sales return and allowance

       = 307800 - 4709 - 20315

      = 282776

2)Total cost of merchandise purchased = Invoice cost - Purchase discount - purchase return and allowance + cost of transportation in

    = 132300-2778-6350+3900

      = 127072

3)

Cost of goods sold =Beginning inventory + net cost of purchase -ending inventory

           = 36315+ 127072 - 45000

           = 118387

Multistep Income statement

for the period ended August 31 2017

4)

single step Income statement

for the period ended 31 August 2017

Multistep Income statement

for the period ended August 31 2017

Sales revenue 307800 sales Discount (4709) sales return and allowance (20315) Net sales 282776 Less:cost of goods sold Beginning merchandise inventory 36315 Net purchase 127072 less:endiing merchandise inventory (45000) cost of goods sold (118387) Gross margin 164389 less:Selling ,general and administrative expense selling expense sales salaries expense 42169 Rent space-selling space 14467 Advertisingexpense 26163 ((82799) General and administrative expense Store supplies expense 3694 office salaries expense 38475 Rent expense -office space 3694 office supplies expense 1231 (47094) Total selling ,General and administrative expense (129893) Net operating income 34496

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