Question

Credit $ 47,933 136,056 283,860 Debit Merchandise inventory (ending) $ 41,500 Other (noninventory) assets 166,000 Total liabilities K. Valley, Capital K. Valley, Withdrawals 8,000 Sales Sales discounts 4,343 Sales returns and allowances 18,735 Cost of goods sold 109,483 Sales salaries expense 38,889 Rent expense-Selling space 13, 341 Store supplies expense 3,406 Advertising expense 24,128 Office salaries expense 35,483 Rent expense-Office space 3,406 Office supplies expense 1,135 Totals $ 467,849 $ 467,849 Beginning merchandise inventory was $33,491. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs. Invoice cost of merchandise purchases Purchases discounts received Purchases returns and allowances Costs of transportation-in $122,010 2,562 5,856 3,900 Required: 1. Compute the company's net sales for the year. 2. Compute the company's total cost of merchandise purchased for the year. 3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses. 4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Answer 1

1
Sales	283860
Less: Sales discounts	(4343)
Sales returns and allowances	(18735)
Net sales	260782
2
Cost of Merchandise Purchased
Invoice cost of merchandise purchased	122010
Purchase discounts received	(2562)
Purchase returns and allowances	(5856)
Costs of transportation-in	3900
Total cost of merchandise purchased	117492
3
VALLEY COMPANY
Income Statement
For Year Ended August 31
Sales		283,860
Less: Sales discounts	4,343
Less: Sales returns and allowances	18,735	23078
Net sales		260,782
Cost of goods sold		109,483
Gross profit		151,299
Expense
Selling expenses
Sales salaries expense	38,889
Rent expense - Selling space	13,341
Store supplies expense	3,406
Advertising expense	24,128
Total selling expenses		79,764
General and administrative expenses
Office salaries expense	35,483
Rent expense - Office space	3,406
Office supplies expense	1135
Total general and administrative expenses		40,024
Total expenses		119,788
Net income		31,511
4
VALLEY COMPANY
Income Statement
For Year Ended August 31
Net sales		260,782
Expenses
Cost of goods sold	109,483
Selling expenses	79,764
General and administrative expenses	40,024
Total expenses		229,271
Net income		31,511