Question

Problem 4-3A Computing merchandising amounts and formatting income statements LO C2, P4

Valley Company’s adjusted trial balance on August 31, 2018, its fiscal year-end, follows.

		Debit			Credit
Merchandise inventory		$	43,500
Other (noninventory) assets			174,000
Total liabilities					$	50,243
Common stock						10,000
Retained earnings						132,038
Dividends			8,000
Sales						297,540
Sales discounts			4,552
Sales returns and allowances			19,638
Cost of goods sold			114,570
Sales salaries expense			40,763
Rent expense—Selling space			13,984
Store supplies expense			3,570
Advertising expense			25,291
Office salaries expense			37,193
Rent expense—Office space			3,570
Office supplies expense			1,190
Totals		$	489,821		$	489,821

On August 31, 2017, merchandise inventory was $35,105. Supplementary records of merchandising activities for the year ended August 31, 2018, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	127,890
Purchases discounts received		2,686
Purchases returns and allowances		6,139
Costs of transportation-in		3,900

  
Required:

1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Answer 1

solution - D Net salez = 273350 - 2 cost of merchandese purchased = 127890 - 2686 - 6139 + 3900 183965 Valley company mutiple step Income statement for year ended August 31, 2018 297540 Salez Less: sales discounts 4552 19638 24190 223350 114570 158780 Less: sales returns and allow ances Net sales Cost of goods sold Gross profet Experse : selling expense: ales salarles expense pert expense - selling space Store supplees expense Advertising experse Total selling expense General and administrative exp: 40763 13984 3570 25291 83608

31143 3570 office salaries expense Rent expense - Office space exce S°Рpus, expe Total general and administrative 190 +1953 expeg Toh еxрек . Net Income 125561 3333 O valley Company Single step Income statement for year ended Aug 31, 2018 Net sales Ra935o 11570 g366% Expersog ; Cost of goods sold selling expenses al and administrative ех рус Totоu схреция Net Income +953 R4013 33219