Question

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 45,000 Other (noninventory) assets 180,000 Total liabilities $ 51,975 Common stock 10,000 Retained earnings 136,529 Dividends 8,000 Sales 307,800 Sales discounts 4,709 Sales returns and allowances 20,315 Cost of goods sold 118,387 Sales salaries expense 42,169 Rent expense—Selling space 14,467 Store supplies expense 3,694 Advertising expense 26,163 Office salaries expense 38,475 Rent expense—Office space 3,694 Office supplies expense 1,231 Totals $ 506,304 $ 506,304 On August 31, 2016, merchandise inventory was $36,315. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs. Invoice cost of merchandise purchases $ 132,300 Purchases discounts received 2,778 Purchases returns and allowances 6,350 Costs of transportation-in 3,900 Required: 1. Compute the company’s net sales for the year. 2. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

Answer 1

1
Sales	307800
Less: Sales discounts	(4709)
Sales returns and allowances	(20315)
Net sales	282776
2
VALLEY COMPANY
Income Statement
For Year Ended August 31, 2017
Sales		307,800
Less: Sales discounts	4,709
Less: Sales returns and allowances	20,315	25024
Net sales		282,776
Cost of goods sold		118,387
Gross profit		164,389
Expense
Selling expenses
Sales salaries expense	42,169
Rent expense - Selling space	14,467
Store supplies expense	3,694
Advertising expense	26,163
Total selling expenses		86,493
General and administrative expenses
Office salaries expense	38,475
Rent expense - Office space	3,694
Office supplies expense	1231
Total general and administrative expenses		43,400
Total expenses		129,893
Net income		34,496