(1) Beginning merchandise inventory Net purchases Cost of merchandise available
ID: 2503577 • Letter: #
Question
(1)
Beginning merchandise inventory
Net purchases
Cost of merchandise available for sale
$25,500
$3,400
?
(5)
Gross profit
Operating expenses
Net profit
Part 2:
Prepare an Income Statement from the following information:
Displayed below are five transactions
(1)
Beginning merchandise inventory
Net purchases
Cost of merchandise available for sale
$75,000
$15,800
?
(2)
Net sales
Cost of merchandise sold
Gross profit on sales
$65,000$
45,500
?
(3)
Purchases
Transport in
Cost of delivered merchandise
$25,500
$3,400
?
Sales
Sales return of allowances
Net sales
$120,000
$12,000
?
(5)
Gross profit
Operating expenses
Net profit
$20,200
$16,400
?
Instruction:
Compute the missing amounts.
Explanation / Answer
Beginning merchandise inventory = $75,000
Purchases = $15,800
$75,000 - $15,800 = $59,200
Cost of merchandise available for sale = $59,200
(2) Net sales = $65,000
Cost of merchandise sold $45,500
$65,000 - $45,500 = $19,500
Gross profit on sales = $19,500
(3) Net purchases = $25,500
Transport in = $3,400
$25,500 + $3,400 = $28,900
Cost of delivered merchandise = $28,900
(4) Sales = $120,000
Sales return of allowances = $12,000
Remember allowances are basically discounts, so the company is losing money.
$120,000 - $12,000 = $108,000
Net sales = $108,000
(5) Gross profit = $20,200
Operating expenses = $16,400
$20,200 - $16,400 = $3,800
Net profit = $3,800
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