Question

Merchandiser’s Income Statement Puzzler

Using the following information, calculate (a) net sales, (b) cost of goods sold, (c) gross margin from sales, and (d) net income.

Freight In

$   400

Merchandise Inventory, Jan.1

30,000

Gross Sales

120,000

Purchase Discounts

600

Advertising Expense

8,000

Purchases

40,000

Merchandise Inventory, Dec.31

10,000

Sales Returns and Allowances

1,000

General and Administrative Expenses

14,000

 

Net Sales                                         a. ____________________

Cost of Goods Sold                       b. ____________________

Gross Margin from Sales               c. ____________________

Net Income                                      d. ____________________

Answer 1

Gross Sales Less: Sales returns and allowances (a) Net Sales $ $ $ 120,000 (1,000) 119,000 $ Purchases Add: Freight in Less: Purchase discounts Net Purchases Add: Merchandise Inventory, Jan.1 Merchandise inventory available for sale Less: Merchandise Inventory, Dec 31 (b) Cost of goods sold $ $ $ $ $ $ 40,000 400 (600) 39,800 30,000 69,800 (10,000) 59,800 $ 59,200 ($ 119,000 - $ 59,800) (c') Gross margin from sales (Net Sales - Cost of goods sold) Gross margin from sales Less: Advertising Expense General and Administrative Expense (d) Net Income $ $ $ $ 59,200 (8,000) (14,000) 37,200