Question

Zoli Company provided the following information for 2019

Purchases    5,250,000.00

Purchases returns & allowances    150,000.00

Rental Income    250,000.00

Selling Expenses:

   Freight out 175,000.00

   Saleman's Commission 650,000.00

   Depreciation - Store Equipment    125,000.00

Merchandise Inventory , January 1,000,000.00

Merchandise Inventory , December 31 1,500,000.00

Sales 7,850,000.00

Sales returns and Allowances    140,000.00

Sales Discounts    10,000.00

Administrative Expenses

Officer's Salaries 500,000.00

Depreciation - Office Equipment 300,000.00

Freight in 500,000.00

Income Tax 250,000.00

Loss on Sale of Equipment 50,000.00

Purchase Discount 100,000.00

Dividend Revenue 150,000.00

Loss on Sale of Investment 50,000.00

*Prepare an Income Statement using "functional method' for the year WITH SUPPORTING NOTES, please

Answer 1

SOLUTION:

Note 1 – Net sales revenue
Gross sales		7,850,000
Sales returns and allowances		-140,000
Sales discounts		-10,000
Net sales revenue		7,700,000
Note 2 – Cost of sales
Inventory, January 1		1,000,000
Purchases	5,250,000
Freight in	500,000
Purchase returns and allowances	-150,000
Purchase discounts	-100,000
Net purchases		5,500,000
Goods available for sale		6,500,000
Inventory, December 31		-1,500,000
Cost of sales		5,000,000
Note 3 – Other income
Rental income		250,000
Dividend revenue		150,000
Total other income		400,000
Note 4 – Selling expenses
Freight out		175,000
Salesmen’s commission		650,000
Depreciation – store equipment		125,000
Total selling expenses		950,000
Note 5 – Administrative expenses
Officers’ salaries		500,000
Depreciation – office equipment		300,000
Total administrative expenses		800,000
Note 6 – Other expenses
Loss on sale of equipment		50,000
Loss on sale of investment		50,000
Total other expenses		100,000