Question

Decision case please

Accounting 1 Handouts $12.700 Interest Revenue Merchandise inventory Notes Payable long term Salaries Payable Net Sales Revenue Rent Expense Selling Solaries Expense Administrativel $ 400 Accounts Payable 45,000 Accounts Receivable 54,000 Accumulated Depreciation Equipment 2.800 Fisher, Capital 299,000 Fisher, W a ls 15100 Cash 2.009 Cost of Goods Sold 6.500 Equipment 13.00 interest Payable 2100 Nest Expense Administrativel 1.2 Salaries Expense Celing 4.600 tis Expenseling Uneared Revenue Interest Expense Depreciation Experte Equipment Administrative Utilities Expense (Administrativel Delivery Expense Selling Requirements R1 Prepare a multi-step income statement R2. M. Fisher, owner of the company, strives to earn a gross profit percentage of at least 50%. Did Farm Quality achieve this goal? Show your calculations. Decision Case Jim McNamara and Holly Clark opened Game-Time T-Shirts to sell T-shirts for football games at their college. The company completed the first year of operations, and the owners are generally pleased with operating results, as shown by the following income statement: Game-Time T-Shirts Income Statement Year Ended December 31, 2018 Net sales revenue Cost of goods sold Gross margin Operating expenses Selling expense General expense $ 375,000 185,000 190,000 60,000 30,000 $ 100,000 Net Income Manartara and Clark are considering how to expand the business. They each propose a way to increase profits to $150,000 during 2019 McNamara believes they should advertise more heavily. He believes additional advertising costing $25,000 will increase net sales by 30% and leave general expense unchanged. 1. Clark proposes selling higher margin merchandise, such as sweatshirts. An importer can supply a minimum of 1,000 sweatshirts for $35 each; Game-

Answer 1

Answer with working notes and explanation is given below

Plan(b) $427,500 Single step Income Statement Plan(a) Net sales revenue $487,500 Less: Expenses Cost of goods sold $240,500 Selling expenses $85,000 General expense $30,000 Net Income $132,000 $211,250 $65,000 $30,000 $121,250 come Plan(a) is preferred since it has higher income compared to Plan (b) Working notes: Plana) Proposed $112,500 Net sales revenue Cost of goods sold Gross Margin Selling expenses General expense Net Income Existing $375,000 $185,000 $190,000 $60,000 $30,000 $100,000 $57,000 $25,000 Total $487,500 $240,500 $247,000 $85,000 $30,000 $132,000 $32,000 Note: COGS will increase proportionally - $185,000/$275,000*$112,500 Plan b) Net sales revenue Cost of goods sold Gross Margin Selling expenses General expense Net Income Existing $375,000 $185,000 $190,000 $60,000 $30,000 $100,000 Proposed $52,500 $26,250 $26,250 $5,000 Total $427,500 $211,250 $216,250 $65,000 $30,000 $121,250 $21,250 Note: Increase in sales = 750 units *$70 COGS = 750 units * $35