Question

Presented below are the components in Veasy Company’s income statement. Determine the missing amounts.

Sales Revenue Cost of goods Sold Gross profit Operating expenses Net Income

a. $ 75,000 a. ? a. $ 28,000 a. ? a. $ 9,800

b. $ 108,000 b. $70,000 b. ? b. ? b. $29,500

c. ? c. $ 83,900 c. $ 79,600 c. $ 39,500 c. ?

Compute missing amounts in determining net income.

Cha Company buys merchandise on account from Wirtz Company. The selling price of the goods is $780, and the cost of the goods is $470. Both companies use perpetual inventory systems. Journalize the transaction on the books of both companies.   

Journalize perpetual inventory entries.

Information related to Kerber Co. is presented below.

1. On April 5, purchased merchandise on account from Wilkes Company for $23,000, terms 2/10, net/30, FOB shipping point.

2. On April 6, paid freight costs of $900 on merchandise purchased from Wilkes.

3. On April 7, purchased equipment on account for $26,000.

4. On April 8, returned damaged merchandise to Wilkes Company and was granted a $3,000 credit for returned merchandise.

5. On April 15, paid the amount due to Wilkes Company in full.

Journalize purchase transactions.

Kern’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern’s inventory consisted of books purchased for $1,800. During June, the following merchandising transactions occurred.

June 1- Purchased books on account for $1,600 from Binsfeld Publishers, FOB destination, terms 2/10, n/30. The appropriate party also made a cash payment of $50 for the freight on this date.

3 Sold books on account to Reading Rainbow for $2,500. The cost of the books sold was $1,440.

6 Received $100 credit for books returned to Binsfeld Publishers.

9 Paid Binsfeld Publishers in full, less discount.

15 Received payment in full from Reading Rainbow.

17 Sold books on account to Rapp Books for $1,800. The cost of the books sold was $1,080.

20 Purchased books on account for $1,800 from McGinn Publishers, FOB destination, terms 2/15, n/30. The appropriate party also made a cash payment of $60 for the freight on this date.

24 Received payment in full from Rapp Books.

26 Paid McGinn Publishers in full, less discount.

28 Sold books on account to Baeten Bookstore for $1,600. The cost of the books sold was $970.

30 Granted Baeten Bookstore $120 credit for books returned costing $72.

Kern’s Book Warehouse’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Instructions Journalize the transactions for the month of June for Kern’s Book Warehouse using a perpetual inventory system.

Answer 1

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a.
	Cost of Goods Sold:
	Sales Revenue	$       75,000
	Less: Gross Profit	$       28,000
	Cost of Goods Sold	$       47,000
	Operating Expense:
	Gross Profit	$       28,000
	Less: Net Income	$         9,800
	Operating Expenses	$       18,200
b.
	Gross Profit:
	Sales Revenue	$     108,000
	Cost of Goods Sold	$       70,000
	Gross Profit	$       38,000
	Operating Expense:
	Gross Profit	$       38,000
	Less: Net Income	$       29,500
	Operating Expenses	$         8,500
c.
	Sales Revenue:
	Cost of Goods Sold	$       83,900
	Gross Profit	$       79,600
	Sales Revenue	$     163,500
	Net Income
	Gross Profit	$     163,500
	Less: Operating Expense	$       39,500
	Operating Expenses	$     124,000