Question

EXERICSES Company C $540,000 90,000 Ex. 1-Income statement relationships. Fill in the appropriate blanks for each of the independent situations below. Company A Company B Sales revenue (a) $_ $343,400 Beginning inventory 52,600 (d) Net purchases 195,300 255,600 Ending inventory 52,200 108,000 Cost of goods sold (b) 118,000 75,300 Gross profit 50,000 Operating expenses Income before taxes 6,000 63,000 427,000 (h) 48,000 (c) (0) (1)

Answer 1

Company A:

First we will calculate cost of goods sold (b) as per below:

Cost of goods sold (b) = Beginning inventory + Net purchases - Ending inventory

Cost of goods sold (b) = $52600 + $195300 - $52200

Cost of goods sold (b) = $195700

Next we will calculate sales (a) as per below:

Gross Profit = Sales revenue (a) - Cost of goods sold

$75300 = Sales revenue (a) - $195700

Sales revenue (a) = $75300 + $195700

Sales revenue (a) = $271000

Next we will calculate operating expenses (c) as per below:

Income before taxes = Gross Profit - Operating expenses (c)

$6000 = $75300 - Operating expenses (c)

Operating expenses (c) = $75300 - $6000

Operating expenses (c) = $69300

Company B:

First we will calculate income before taxes (f) as per below:

Income before taxes (f) = Gross Profit - Operating expenses

Income before taxes (f) = $118000 - $50000

Income before taxes (f) = $68000

Next, we will calculate cost of goods sold (e) as per below:

Gross profit = Sales revenue - Cost of goods sold (e)

$118000 = $343400 - Cost of goods sold (e)

Cost of goods sold (e) = $343400 - $118000

Cost of goods sold (e) = $225400

Next, we will calculate beginning inventory (d) as per below:

Cost of goods sold = Beginning inventory (d) + Net purchases - Ending inventory

$225400 = Beginning inventory (d) + $255600 - $108000

$225400 = Beginning inventory (d) + $117600

Beginning inventory (d) = $225400 - $117600

Beginning inventory (d) = $107800

Company C:

First we will calculate net purchases (g) as per below:

Cost of goods sold = Beginning inventory + Net purchases (g) - Ending inventory

$427000 = $90000 + Net purchases (g) - $63000

$427000 = Net purchases (g) + $27000

Net purchases (g) = $427000 - $27000

Net purchases (g) = $400000

Next, we will calculate gross profit (h) as per below:

Gross profit (h) = Sales revenue - Cost of goods sold

Gross Profit (h) = $540000 - $427000

Gross Profit (h) = $113000

Next we will calculate income before taxes (i) as per below:

Income before taxes (i) = Gross Profit - Operating expenses

Income before taxes (i) = $113000 - $48000

Income before taxes (i) = $65000