Question

Problem 4-3A Computing merchandising amounts and formatting income statements LO C2, P4 Valley Company's adjusted trial balance on August 31, 2018, Its fiscal year-end, follows. Credit $ Debit 32,000 128,000 $ 36,960 10,000 97,636 8,000 218,880 Merchandise inventory Other (noninventory) assets Total llabuities Common stock Retained earnings Dividends Sales Sales discounts Sales returns and allowances Cost of goods sold Sales salaries expense Rent expense-Selling space Store supplies expense Advertising expense office salaries expense Rent expense-office space office supplies expense Totals 3,349 14,446 85,312 29.987 10.217 2.627 19,605 27, 360 2.627 876 $363,476 $363, 476 On August 31, 2017, merchandise inventory was $25,824. Supplementary records of merchandising activities for the year ended August 31, 2018, reveal the following itemized costs. Invoice cost of merchandise purchases Purchases discounts received Purchases returns and allowances Costs of transportation in $94,080 1,976 4,516 3,900

Answer 1

Solution:

1.Net Sales :$201,085

Sales	$218,880
Less: sales discount	$3,349
Less: sales return and allowances	$14,446
Net sales	$201,085

2.) The company's total cost of merchandise purchased: $91,488

Cost of merchandise purchases	$94,080
Less: purchased discount received	$1,976
Less: purchase return and allowances	$4,516
Add: cost of transportation	$3,900
Total cost of merchandise purchased	$91,488

3. Valley Company

Income Statement

For the Year Ended August 31, 2018

Sales		$218,880
Less: Sales discount	$3,349
Less: Sales return and allowances	$14,446
Net sales		$201,085
Cost of goods sold		$85,312
Gross profit		$115,773
Expenses:
Selling expenses:
Advertising expenses	$18,605
Store supplies expenses	$2,627
Rent expenses - Selling expenses	$10,287
Sales salaries expenses	$29,987
Total selling expenses		$61,506
General and administrative expenses:
Office salaries expenses	$27,360
Rent office - Office space	$2,627
Office supplies expenses	$876
Total general and administrative expenses		$30,863
Total expenses		$92,369
Net income		$23,404

4. Valley Company

Income Statement

For the Year Ended August 31, 2018

Net sales		$201,085
Expenses:
General and administrative expenses	$30,863
Selling expenses	$61,506
Cost of goods sold	$85,312
Total expenses		$177,681
Net income		$23,404