Question

*Exercise 8-6 Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing. 2017 2018 2016 $288,820 Sales revenue $410,020 Sales returns and allowances (11,060) (13,430) Net sales 348,998 Beginning inventory 19,210 33,650 Ending inventory Purchases Purchase returns and allowances Freight-in Cost of goods sold Gross profit on sales (5,040) 8,110 (235,200) 261,470 (7,800) 8,410 298,835 (10,240) 12,600 (293,080) 96,640 42,560 95,570

Answer 1

Answer)

Income Statement

Particulars	2016	2017	2018
Sales revenue	$ 288,820	$ 362,428	$ 410,020
Sales Returns and Allowances	- $ 11,060	-$ 13,430	-$ 20,300
Net Sales	$ 277,760	$ 348,998	$ 389,720
Beginning Inventory	$ 19,210	$ 33,650	$ 42,302
Ending Inventory	- $ 33,650	-$ 42,302	-$ 50,417
Purchases	$ 246,570	$ 261,470	$ 298,835
Purchase returns and allowances	- $ 5,040	-$ 7,800	-$ 10,240
Freight-in	$ 8,110	$ 8,410	$ 12,600
Cost of Goods Sold	- $ 235,200	-$ 253,428	-$ 293,080
Gross profit on sales	$ 42,560	$ 95,570	$ 96,640

Notes:

• The value of missing figures is highlighted in grey colour in the above table.
• Although the value of ending inventory in all the three years is a positive figures. But since it is reduced from the value of net purchases and beginning inventory to calculate cost of goods sold, it is shown with minus (-) sign preceding the value.

Working Notes:

Calculation of missing figures for the year 2016

Calculation of Net Sales

Net Sales = Sales revenue – Sales returns and allowances

                  = $ 288,820 - $ 11,060

                  = $ 277,760

Therefore the value of net sales is $ 277,760.

Calculation of ending inventory

The ending inventory for a given year is the beginning inventory for the immediately succeeding year. Therefore, the value of ending inventory in the year 2016 will be equal to the value of beginning inventory in the year 2017.

Thus the value of ending inventory for the year 2016 is $ 33,650.

Calculation of value of purchases

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 235,200 = $ 19,210 + Purchases - $ 5,040 + $ 8,110 - $ 33,650

Purchases = $ 235,200 + $ 5,040 + $ 33,650 - $ 19,210 - $ 8,110

                   = $ 246,570

Thus the value of purchases is $ 246,570

Calculation of missing figures for the year 2017

Calculation of Sales Revenue

Net Sales = Sales revenue – Sales returns and allowances

$ 348,998 = Sales revenue – 13,430

Sales revenue = $ 348,998 + 13,430

                          = $ 362,428

Therefore the value of Sales revenue is $ 362,428

Calculation of Cost of goods sold

Gross Profit on sales = Net sales – Cost of Goods Sold

$ 95,570 = $ 348,998 – Cost of Goods Sold

Cost of Goods Sold = $ 348,998 - $ 95,570

                                   = $ 253,428                             

Therefore the value of cost of goods sold is $ 253,428

Calculation of value of ending inventory

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 253,428 = $ 33,650 + $ 261,470 - $ 7,800 + $ 8,410 – Ending inventory

Ending inventory = $ 33,650 + $ 261,470 - $ 7,800 + $ 8,410 - $ 253,428

                               = $ 42,302

Therefore the value of ending inventory is $ 42,302

Calculation of missing figures for the year 2018

Calculation of beginning inventory

The beginning inventory for a given year is the ending inventory for the immediately preceding year. Therefore, the value of beginning inventory in the year 2018 will be equal to the value of ending inventory of the year 2017.

Thus the value of beginning inventory for the year 2018 is $ 42,302.

Calculation of value of ending inventory

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 293,080 = $ 42,302 + $ 298,835 - $ 10,240 + $ 12,600 – Ending inventory

Ending inventory = $ 42,302 + $ 298,835 - $ 10,240 + $ 12,600 – $ 293,080

                               = $ 50,417

Therefore the value of ending inventory is $ 50,417

Calculation of value of Net Sales

Gross Profit = Net Sales – Cost of goods sold

$ 96,640 = Net sales - $ 293,080

Net Sales = $ 293,080 + $ 96,640

                  = $ 389,720

Therefore the value of net sales is $ 389,720

Calculation of Sales returns and allowances

Net Sales = Sales revenue – Sales returns and allowances

$ 389,720 = $ 410,020 – Sales returns and allowances

Sales returns and allowances = $ 410,020 - $ 389,720

                                                    = $ 20,300

Therefore the value of Sales returns and allowances is $ 20,300