Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 16: Q16-7SE (page 887)

Computing cost of goods sold and operating income, merchandising company

Consider the following partially completed income statements for merchandising companies and compute the missing amounts:

Smith, Inc. Allen, Inc.

Net Sales Revenue \( 101,000 \) (d )

Cost of Goods Sold:

Beginning Merchandise Inventory (a) 29,000

Purchases and Freight In 50,000 (e)

Cost of Goods Available for Sale (b) 89,000

Ending Merchandise Inventory (2,200) (2,200)

Cost of Goods Sold 61,000 (f)

Gross Profit 40,000 114,000

Selling and Administrative Expenses (c ) 84,000

Operating Income \( 12,000 \) (g)

Short Answer

Expert verified

The required income statement is completed as per the given data.

Step by step solution

01

Computation Net sales revenue

Net Sales Revenue=COGS+Gross Profit

=$86,800+$114,000

=$200,800

02

Income statement

Income Statement

Smith Inc ($)

Allen Inc ($)

Net Sales Revenue (86,800+114,000)

$101,000

D $200,800

Cost of Goods Sold:

Beginning Merchandise Inventory (63,200-50,000)

A $13,200

$29,000

Purchases and Freight In (89,000-29,000)

$50,000

E $60,000

Cost of goods available for sale (61,000+2,200)

B $63,200

$89,000

Ending Merchandise Inventory

-$2,200

-$2,200

Cost of goods sold (89,000-2,200)

$61,000

F $86,800

Gross profit

$40,000

$114,000

Selling and administrative expenses (40,000-12,000)

C $28,000

$84,000

Operating Income (114,000-84,000)

$12,000

G $30,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

f. Cost of TV ads.

Describe a service company, and give an example.

Calculating unit cost per service

Marx and Tyler provides hair-cutting services in the local community. In February, the business cut the hair of 190 clients, earned \(4,800 in revenues, and incurred the following operating costs:

Hair Supplies Expense \) 950

Wages Expense 548

Utilities Expense 190

Depreciation Expense—Equipment 60

What was the cost of service to provide one haircut?

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

4. Has a focus on the future.

Computing cost of goods manufactured

Use the following inventory data for Caddy Golf Company to compute the cost of goods manufactured for the year:

Direct Materials Used $ 12,000

Manufacturing Overhead 21,000

Work-in-Process Inventory:

Beginning Balance 1,000

Ending Balance 5,000

Direct Labor 9,000

Finished Goods Inventory:

Beginning Balance 18,000

Ending Balance 4,000
See all solutions

Recommended explanations on Business Studies Textbooks

Managerial Economics

Read Explanation

Influences On Business

Read Explanation

Change Management

Read Explanation

Strategic Analysis

Read Explanation

Managers

Read Explanation

Strategic Direction

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free