Best Company sells office supplies. The following information summarizes Best\'s
ID: 2463921 • Letter: B
Question
Best Company sells office supplies. The following information summarizes Best's operating activities for 2012:
Utilities for store $6,000
Rent for store $8,000
Sales commissions $4,500
Purchases of merchandise $54,000
Inventory on January 1, 2012 $30,000
Inventory on December 31, 2012 $20,500
Sales revenue $108,000
Required: Prepare an income statement for Best Company, a merchandiser, for the year ended December 31, 2012.using the format below. Please include a vertical analysis rounded to the nearest tenth of a percent.
Sales revenue
Cost of goods sold
Beginning inventory
Purchases
Cost of goods available for sale
Ending inventory
Cost of goods sold
Gross profit
Selling expenses
Sales commissions
General expenses
Rent expense
Utilities expense
Total operating expenses
Net income/(loss)
Explanation / Answer
INCOME STATEMENT
Sales Revenue $108,000
Cost of Goods Sold
Beginning Inventory $30,000
Add: Purchases $54,000
Cost of Goods Available for Sale $84,000
Less: Ending Inventory ($20,500) $63,500
Gross Profit $44,500
Selling Expenses
Sales Commissions Expense $4,500
Administrative Expenses
Rent Expense $8,000
Utilities Expense $6,000
Total Operating Expenses $18,500
Operating Income $26,000
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