During the past several months, you have decided to make some changes in your li
ID: 2499566 • Letter: D
Question
During the past several months, you have decided to make some changes in your life. You have always wanted to open your own small business and have decided you finally will. You have decided you will open your own merchandising business on January 1, 2016.
During your planning for this Grand Opening, you made the following decisions for your business.
You will fund the opening of your business with a transfer from your personal bank account to the business bank account in the amount of $20,000 on Jan 1.
You have already signed a lease for a building for a monthly rent of $1000 and your first rental payment is due on Jan 1.
You will use a Perpetual inventory system and the LIFO method to account for your inventory.
You will sell your product to all customers on account. Your terms for all customers are 2/10, n/30.
To start out, you don’t plan on hiring any employees.
Assignment
Annual Income Statement
Explanation / Answer
Annual income statement Amount Sales revenue $9,000 (3000+1500+4500) Less:cost of good sold $6,650 (2000+1100+3300+250) Gross profit $2,350 Operating expenses Discount $60 Rent $1,000 office expense $250 Advertisement expense $100 Telephone expense $150 Electricity expense $200 Miscellaneous expense $100 Deprectiation $83 Total operating expenses $1,943 Net profit $407
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