Question

Exercise 3-15

Presented below is financial information for two different companies.

Compute the missing amounts.

		Stellar Company			Pearl Company
Sales revenue		81,200				(d)
Sales returns and allowances			(a)		5,450
Net sales		80,740			85,710
Cost of goods sold		57,090				(e)
Gross profit			(b)		36,450
Operating expenses		15,680			23,960
Net income			(c)		12,490

Answer 1

(a) Net sales = Sales revenue - Sales returns and allowances

$80,740 = $81,200 - Sales returns and allowances

Sales returns and allowances = $81,200 - $80,740

Sales returns and allowances = $460

(b) Gross profit = Net sales - Cost of goods sold

Gross profit = $80,740 - $57,090

Gross profit = $23,650

(c) Net income = Gross profit - Operating expenses

Net income = $23,650 - $15,680

Net income = $7,970

(d) Net sales = Sales revenue - Sales returns and allowances

$85,710 = Sales revenue - $5,450

Sales revenue = $85,710 + $5,450

Sales revenue = $91,160

(e) Cost of goods sold = Net sales - Gross profit

Cost of goods sold = $85,710 - $36,450

Cost of goods sold = $49,260