Question

Valley Company’s adjusted trial balance on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expense—selling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.

		Debit			Credit
Merchandise inventory (ending)		$	45,000
Other (noninventory) assets			180,000
Total liabilities					$	51,975
Common stock						60,575
Retained earnings						85,954
Dividends			8,000
Sales						307,800
Sales discounts			4,709
Sales returns and allowances			20,315
Cost of goods sold			118,387
Sales salaries expense			42,169
Rent expense—Selling space			14,467
Store supplies expense			3,694
Advertising expense			26,163
Office salaries expense			38,475
Rent expense—Office space			3,694
Office supplies expense			1,231
Totals		$	506,304		$	506,304

Beginning merchandise inventory was $36,315. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$	132,300
Purchases discounts received		2,778
Purchases returns and allowances		6,350
Costs of transportation-in		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. net sales

sales revenue	307800
less: sales return and allowances	-20315
Less: sales discount	-4709
Net sales revenue	282776$

2. purchase cost

invoice cost o merchandise purchase	132300
purchase discount	-2778
purchase returns	-6350
cost of transportation in	3900
Total cost of merchandise purcahse	127072

Also check

beginning + purchase - ending = cost of goods sold

36315+purchase-45000=118387

purchase= 118387+45000-36315

=127072$

3. multi step income statement

sales revenue	307800
less: sales allowance returns	-20315
sales discounts	-4709
Net sale revenue		282776
Less: cost of goods sold
Opening inventory	36315
Add purchase	127072
Less: closing	45000
cost of goods sold		118387
Gross profit [282776-118387		164389
Less: operating expense
sales salaries expense	42169
rent expense-sales space	14467
store supplies expense	3694
selling expense		60330
advertising expense	26163
office salaries expense	38475
rent expense-office	3694
office supplies expense	1231
General and administrative expense		69563
operating income [164389-60330-69563]		34496
other non operating income		0
net income		34496

4. single step

Net sales revenue		282776
less expenses
cost of goods sold		118387
sale salaries expense	42169
rent expense-sales space	14467
stores supplies expense	3694
selling expense		60330
advertising expense	26163
office salaries expense	38475
rent expense	3694
office supplies expense	1231
general and administrative expense		69563
net income		34496