Question

[The following information applies to the questions displayed below.) Valley Company's adjusted account balances from its general ledger on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expense-selling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative. Credit $ 40, 425 47,114 69,497 239,400 Adjusted Account Balances Debit Merchandise inventory (ending) $ 35,000 Other (noninventory) assets 140,000 Total liabilities Common stock Retained earnings Dividends 8,000 Sales Sales discounts 3,663 Sales returns and allowances 15,800 Cost of goods sold 92,945 Sales salaries expense 32,798 Rent expense-Selling space 11,252 Store supplies expense 2,873 Advertising expense 20,349 Office salaries expense 29,925 Rent expense-office space 2,873 Office supplies expense Totals $396, 436 958 $396,436 Beginning merchandise inventory was $28,245. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs. Invoice cost of merchandise purchases Purchases discounts received Purchases returns and allowances Costs of transportation-in $102,900 2,161 4,939 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

1
Sales	239400
Less: Sales discounts	(3663)
Less: Sales returns and allowances	(15800)
Net sales	219937
2
Cost of Merchandise Purchased
Invoice cost of merchandise purchased	102900
Purchase discounts received	(2161)
Purchase returns and allowances	(4939)
Costs of transportation-in	3900
Total cost of merchandise purchased	99700
3
VALLEY COMPANY
Income Statement
For Year Ended August 31
Sales		239,400
Less: Sales discounts	3,663
Less: Sales returns and allowances	15,800	19463
Net sales		219,937
Cost of goods sold		92,945
Gross profit		126,992
Expense
Selling expenses
Sales salaries expense	32,798
Rent expense - Selling space	11,252
Store supplies expense	2,873
Advertising expense	20,349
Total selling expenses		67,272
General and administrative expenses
Office salaries expense	29,925
Rent expense - Office space	2,873
Office supplies expense	958
Total general and administrative expenses		33,756
Total expenses		101,028
Net income		25,964
4
VALLEY COMPANY
Income Statement
For Year Ended August 31
Net sales		219,937
Expenses
Cost of goods sold	92,945
Selling expenses	67,272
General and administrative expenses	33,756
Total expenses		193,973
Net income		25,964