Problem 5-3A Computing merchandising amounts and formatting income statements LO

Question

Problem 5-3A Computing merchandising amounts and formatting income statements LO C2, P4

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

On August 31, 2016, merchandise inventory was $30,666. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

  
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.

Debit Credit Merchandise inventory $ 38,000 Other (noninventory) assets 152,000 Total liabilities $ 43,890 K. Valley, Capital 125,585 K. Valley, Withdrawals 8,000 Sales 259,920 Sales discounts 3,977 Sales returns and allowances 17,155 Cost of goods sold 100,577 Sales salaries expense 35,609 Rent expense—Selling space 12,216 Store supplies expense 3,119 Advertising expense 22,093 Office salaries expense 32,490 Rent expense—Office space 3,119 Office supplies expense 1,040 Totals $ 429,395 $ 429,395

Explanation / Answer

3

4

1 Net sales $238,788 2 cost of merchandise purchased 111,720-2,346-5,363+3,900 107911

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