North Company engaged in the following transactions during Year 1:
1) Started the business by issuing $50,000 of common stock for cash.
2) The company paid cash to purchase $38,000 of inventory.
3) The company sold inventory that cost $17,000 for $33,000 cash.
4) Operating expenses incurred and paid during the year, $9,000.
North Company engaged in the following transactions during Year 2:
1) The company paid cash to purchase $35,000 of inventory.
2) The company sold inventory that cost $37,500 for $65,000 cash.
3) Operating expenses incurred and paid during the year, $18,000.
Note: North uses the perpetual inventory system.
REQUIRED:
Gross Margin (year 2) | $ 27,500.00 | ||
Retained Earnings | $ 16,500.00 | ($ 7000 + $ 9500) |
Workings:
Income Statement (Year 1) | |||
Sales | $ 33,000.00 | ||
Less: | Cost of goods sold | $ 17,000.00 | |
Gross Margin | $ 16,000.00 | ||
Less: | Operating expenses | $ 9,000.00 | |
Net Income | $ 7,000.00 |
Income Statement (Year 2) | |||
Sales | $ 65,000.00 | ||
Less: | Cost of goods sold | $ 37,500.00 | |
Gross Margin | $ 27,500.00 | ||
Less: | Operating expenses | $ 18,000.00 | |
Net Income | $ 9,500.00 |
North Company engaged in the following transactions during Year 1: 1) Started the business by issuing...
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