Exercise 2-40 Prepare Statements for a Merchandising Company (LO 2-2) Hill Stree

ID: 2487833 • Letter: E

Question

Exercise 2-40 Prepare Statements for a Merchandising Company (LO 2-2)

Hill Street Electronics has provided the following information for last year:

Sales revenue $ 8,000,000

Store rent 440,000

Store utilities 270,000

Administrative costs 580,000

Sales commissions 1,300,000

Merchandise purchases 5,500,000

Transportation-in costs 210,000

Merchandise inventory, March 1 370,000

Merchandise inventory, February 28 420,000

Required: Prepare an income statement for last year with a supporting cost of goods sold statement.

Explanation / Answer

SOLUTION :

INCOME STATEMENT

SALES REVENUE

8,000,000

LESS : COST OF GOODS SOLD*

- 5,760,000

GROSS PROFIT

2,240,000

LESS : OPERATING EXPENSE

STORE RENT

- 440,000

STORE UTILITIES

- 270,000

ADMINISTRATIVE COSTS

- 580,000

SALES COMMISSIONS

- 1,300,000

NET INCOME/(LOSS)

- 350,000

*COST OF GOODS SOLD

MERCHANDISE INVENTORY, FEBRUARY 28

420,000

ADD : MERCHANDISE PURCHASES

5,500,000

ADD : TRANSPORTATION-IN COSTS

210,000

TOTAL COST OF MERCHANDISE PURCHASED

5,710,000

COST OF MERCHANDISE AVAILABLE FOR SALE

6,130,000

LESS :MERCHANDISE INVENTORY, MARCH 1

- 370,000

COST OF GOODS SOLD

5,760,000