Question

Cherokee Inc. is a merchandiser the provided the following information:

Required:

1. prepare a traditional income statement

2. prepare a contribution format income statement

Cherokee Inc. is a merchandiser that provided the following information Amount 13,000 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 20,000 $ 16,000 $ 9,000 $ 25,000 $ 87,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format Income statement. cos Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional income statement. Cherokee, Inc. Traditional Income Statement Selling and administrative expenses

Answer 1

1.

Cherokee Inc.
Traditional Income Statement
Sales ( 13,000 x 18)		234,000
Cost of goods sold:
Beginning merchandise inventory	9,000
Merchandise purchases	87,000
Cost of goods available for sale	96,000
Ending merchandise inventory	-25,000
Cost of goods sold		-71,000
Gross profit		$163,000
Selling & Administrative Expenses:
Variable selling expense ( 13,000 x 1)	13,000
Variable administrative expense ( 13,000 x 1)	13,000
Fixed selling expense	20,000
Fixed administrative expense	16,000
Total Selling & Administrative expenses		-62,000
Net Income		$101,000

2.

Cherokee Inc.
Traditional Income Statement
Sales ( 13,000 x 18)		234,000
Variable expenses:
Cost of goods sold:
Beginning merchandise inventory	9,000
Merchandise purchases	87,000
Cost of goods available for sale	96,000
Ending merchandise inventory	-25,000
Cost of goods sold	71,000
Variable selling expense (13,000 x 1)	13,000
Variable administrative expense ( 13,000 x 1)	13,000
Total Variable Expenses		-97,000
Contribution Margin		$137,000
Fixed Expenses:
Fixed selling expense	20,000
Fixed administrative expense	16,000
Total Fixed Expenses		-36,000
Net Income		$101,000

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