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Exercise 8-06 Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amount

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Answer 1)

Income Statement

Particulars

2019

2020

2021

Sales revenue

   $ 2,90,150

$ 3,57,168

   $ 4,13,850

Sales Returns and Allowances

     -$ 10,340

    -$ 13,000

     -$ 15,820

Net Sales

   $ 2,79,810

$ 3,44,168

   $ 3,98,030

Beginning Inventory

      $ 21,130

    $ 31,800

       $ 42,012

Ending Inventory

     -$ 31,800

    -$ 42,012

     -$ 48,122

Purchases

   $ 2,42,170

$ 2,60,890

   $ 2,99,310

Purchase returns and allowances

       -$ 4,740

      -$ 8,590

       -$ 9,690

Freight-in

         $ 7,460

        $ 8,500

       $ 12,110

Cost of Goods Sold

-$ 2,34,220

$ 2,50,588

-$ 2,95,620

Gross profit on sales

       $ 45,590

      $ 93,580

   $ 1,02,410

Notes:

  • The value of missing figures is highlighted in grey colour in the above table.
  • Although the value of ending inventory in all the three years is a positive figures. But since it is reduced from the value of net purchases and beginning inventory to calculate cost of goods sold, it is shown with minus (-) sign preceding the value.

Working Notes:

Calculation of missing figures for the year 2019

Calculation of Net Sales

Net Sales = Sales revenue – Sales returns and allowances

                  = $ 290,150 - $ 10,340

                  = $ 279,810

Therefore the value of net sales is $ 279,810.

Calculation of ending inventory

The ending inventory for a given year is the beginning inventory for the immediately succeeding year. Therefore, the value of ending inventory in the year 2019 will be equal to the value of beginning inventory in the year 2020.

Thus the value of ending inventory for the year 2019 is $ 31,800.

Calculation of value of purchases

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 234,220 = $ 21,130 + Purchases - $ 4,740 + $ 7,460 - $ 31,800

Purchases = $ 234,220 + $ 4,740 + $ 31,800 - $ 21,130 - $ 7,460

                   = $ 242,170

Thus the value of purchases is $ 242,170

Calculation of missing figures for the year 2020

Calculation of Sales Revenue

Net Sales = Sales revenue – Sales returns and allowances

$ 344,168 = Sales revenue – 13,000

Sales revenue = $ 344,168 + 13,000

                          = $ 357,168

Therefore the value of Sales revenue is $ 357,168

Calculation of Cost of goods sold

Gross Profit on sales = Net sales – Cost of Goods Sold

$ 93,580 = $ 344,168 – Cost of Goods Sold

Cost of Goods Sold = $ 344,168 - $ 93,580

                                   = $ 250,588                             

Therefore the value of cost of goods sold is $ 250,588

Calculation of value of ending inventory

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 250,588 = $ 31,800 + $ 260,890 - $ 8,590 + $ 8,500 – Ending inventory

Ending inventory = $ 31,800 + $ 260,890 - $ 8,590 + $ 8,500 - $ 250,588

                               = $ 42,012

Therefore the value of ending inventory is $ 42,012

Calculation of missing figures for the year 2021

Calculation of beginning inventory

The beginning inventory for a given year is the ending inventory for the immediately preceding year. Therefore, the value of beginning inventory in the year 2021 will be equal to the value of ending inventory of the year 2020.

Thus the value of beginning inventory for the year 2021 is $ 42,012.

Calculation of value of ending inventory

Cost of Goods sold = Beginning inventory + purchases – purchase returns and allowances + Freight inward – Ending inventory

$ 295,620 = $ 42,012 + $ 299,310 - $ 9,690 + $ 12,110 – Ending inventory

Ending inventory = $ 42,012 + $ 299,310 - $ 9,690 + $ 12,110 – $ 295,620

                               = $ 48,122

Therefore the value of ending inventory is $ 48,122

Calculation of value of Net Sales

Gross Profit = Net Sales – Cost of goods sold

$ 102,410 = Net sales - $ 295,620

Net Sales = $ 295,620 + $ 102,410

                  = $ 398,030

Therefore the value of net sales is $ 398,030

Calculation of Sales returns and allowances

Net Sales = Sales revenue – Sales returns and allowances

$ 398,030 = $ 413,850 – Sales returns and allowances

Sales returns and allowances = $ 413,850 - $ 398,030

                                                    = $ 15,820

Therefore the value of Sales returns and allowances is $ 15,820

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