Q16-7SE
Question
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)
Step-by-Step Solution
VerifiedThe required income statement is completed as per the given data.
Net Sales Revenue=COGS+Gross Profit
=$86,800+$114,000
=$200,800
Income Statement | ||
| Smith Inc ($) | Allen Inc ($) |
Net Sales Revenue (86,800+114,000) | $101,000 | D $200,800 |
Cost of Goods Sold: |
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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 |
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