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, advertising expense. It categorizes the remaining expenses as general and administrative.

		Debit			Credit
Merchandise inventory (ending)		$	33,000
Other (noninventory) assets			132,000
Total liabilities					$	38,115
K. Valley, Capital						110,629
K. Valley, Withdrawals			8,000
Sales						225,720
Sales discounts			3,454
Sales returns and allowances			14,898
Cost of goods sold			87,857
Sales salaries expense			30,924
Rent expense—Selling space			10,609
Store supplies expense			2,709
Advertising expense			19,186
Office salaries expense			28,215
Rent expense—Office space			2,709
Office supplies expense			903
Totals		$	374,464		$	374,464

Beginning merchandise inventory was $26,631. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.

Invoice cost of merchandise purchases	$	97,020
Purchases discounts received		2,037
Purchases returns and allowances		4,657
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

Answer is given below

$225,720 1 Net Sales Sales Less: Sales discounts Sales returns and allowances Net Sales $3,454 $14,898 $18,352 $207,368 $97,020 2 Cost of Mechanise purchased Invoice cost of merchandise purchases Less: Purchases discounts received Purchases returns and allowances $2,037 $4,657 $90,326 $3,900 $94,226 Add: Costs of transportation-in Total cost of merchandise purchased $225,720 $18,352 $207,368 $87,857 $119,511 Valley Company Multi step Income Statement Sales Less: Sales discounts $3,454 Less: Sales returns and allowances $14,898 Net Sales Less: Cost of Goods sold Gross profit Less: Expense Selling expenses Sales salaries expense $30,924 Rent expense-Selling space $10,609 Store supplies expense $2,709 Advertising expense $19,186 Total Selling expense General and administrative expense Office salaries expense $28,215 Rent expense-Office space $2,709 Office supplies expense $903 Total General and administrative expense Net Income $63,428 $31,827 $24,256 $207,368 Valley Company Single Step Income Statement Net Sales Less: Expense Cost of Goods sold $87,857 Selling expense $63,428 General and administrative expense $31,827 Total expense Net Income $183,112 $24,256