Question

The following data pertain to Natalie's Knick Knacks, a store that specializes in seasonal decorations, curios, and other collectibles. Beginning inventory of goods $238,600 Purchases for the year $879,830 Ending inventory $178,450 Natalie typically prices items at a 100% markup. That is, if she paid $30 for an item, she would price it at $60. Of course, she does not expect to sell all items at the full markup. The following represents the pattern of sales in a typical year: 10% of her sales are at the full markup, 60% of sales are with a 25% discount off the list price, 20% at 50% off the list price, and 5% at 80% off the list price. The remainder (5%) represents unsold items, breakage, and so on. Natalie also incurs $136,800 towards the rental of her store, supplies (e.g., bags, tissue), utilities, and so on. She incurs $64,500 toward salaries paid to her employees.

Please prepare an income statement for the most recent year of operations.

Answer 1

Computation of Cost of Goods Sold
Beginning Inventory	$2,38,600
+Purchases	$8,79,830
-Ending Inventory	-$1,78,450
Cost of Goods Sold	$9,39,980
Computation of Sales
% of sales	List Price 200% with Discount	COGS (Total COGS*% of sales)	Sales (200% of COGS)*(1-Discount%)
10%	0%	$93,998	$1,87,996
60%	25%	$5,63,988	$8,45,982
20%	50%	$1,87,996	$1,87,996
5%	80%	$46,999	$18,800
Total Sales			$12,40,774
Income Statement
Particulars	Amount
Sales	$12,40,774
-COGS	-$9,39,980
-Rent	-$1,36,800
-Salaries	-$64,500
Net Income	$99,494