Q15E - Intermediate Accounting (Kieso)

Question

E3-15 (L06) (Missing Amounts) Presented below is financial information for two different companies.

 

Alatorre Company      Eduardo Company

Sales revenue                                       \(90,000                                (d)

Sales returns and allowances               (a)                                       \)5,000

Net sales                                              81,000                                   95,000

Cost of goods sold                            56,000                                      (e)

Gross profit                                     (b)                                             38,000

Operating expenses                    15,000                                          23,000

Net income                                     (c)                                                    15,000

 

Instructions

Compute the missing amounts.

Step-by-Step Solution

Answer

	Alatorre Company	Eduardo Company
Sales revenue	$90,000	(d)$100,000
Sales returns and allowances	(a) $9,000	$5,000
Net sales	$81,000	$95,000
Cost of goods sold	$56,000	(e)$57,000
Gross profit	(b) $25,000	$38,000
Operating expenses	$15,000	$23,000
Net income	(c) $10,000	$15,000

 

Step 1: Meaning of Financial Information

Financial information means the data or information related to a company's monetary transactions or can be connected to an individual. This financial information helps the company know the financial position of the entity.

Step 2: Calculation of sales returns and allowances (a) for Alatorre company

$\begin{array}{l}Salesreturnsandallowances=Salesrevenue-Netsales\\ Salesreturnsandallowances=\$90,000-\$81,000\\ Salesreturnsandallowances=\$9,000\\ \end{array}$

Step 3: Calculation of Gross profit (b) for Alatorre company

$\begin{array}{l}Grossprofit=Netsales-Costofgoodssold\\ Grossprofit=\$81,000-\$56,000\\ Grossprofit=\$25,000\end{array}$

Step 4: Calculation of the missing amount of Net income (c) for Alatorre company

$\begin{array}{l}Netincome=Grossprofit-OperatingExpenses\\ Netincome=\$25,000-\$15,000\\ Netincome=\$10,000\end{array}$

Step 5: Calculation of the missing amount of sales revenue (d)for Eduardo company

$\begin{array}{l}Salesrevenue=Netsales+Salesreturnsandallowances\\ Salesrevenue=\$95,000+\$5,000\\ Salesrevenue=\$100,000\end{array}$

Step 6: Calculation of the missing amount of cost of goods sold (e) for Eduardo company

$\begin{array}{l}Costofgoodssold=Netsales-Grossprofit\\ Costofgoodssold=\$95,000-\$38,000\\ Costofgoodssold=\$57,000\end{array}$