Question

1) Alpha Company provided the following data concerning its income statement: sales, $900,000; purchases, $401,000; beginning inventory, $260,000; ending inventory, $252,000; operating expenses, $102,000; freight-in, $5,000; sales discounts, $21,000; purchases discounts, $15,000; sales returns & allowances, $140,000; and purchases returns & allowances, $44,000. The data are complete and provide the basis for preparation of an income statement. How much is net income?

2) Easton Company had average inventory for the year of $640,000 and an inventory turnover ratio of 8.8. What was the company's Days Outstanding in Inventory. Assume a 365 day year. Round to one decimal place.

Answer 1

Solution : Pagel Question 1). How much is net income? Stepl: Calculation of Met Sales Sales less: Sales Discounts $900,000 ($ 21,000) ($140,000) Less: Sales Returns and Allowances Met Sales $734,000 Step 2: Cakeulation of Met Purchases Purchases Less: Purchases Discounts Less: Purchases Returns & Allowances to Add & Freight- Met Purchases $401,000 ($ 15,000) ($ 44,000) $ 5,000 $347,000 - in

Cost of Goods Sold Step3: Calculation of Cost of Page 2 Goods Sold Beginning Inventory $260.000 Addo Met Purchases $ 347,000 Less: Ending Inventory until ($252,000) $355.000 Main Step / Answer: Statement of Met Income Met Sales Less: Cost of Goods Sold Gross Margin $734,000 ($ 355.000) $ 384,000 ($ 102,000) $282,000 Less: Operating Expenses Met Income Answer & Net Income $282,000

Question 2: Page? What was the company's Days Outstanding in Inventory? Days Outstanding in Inventory Inventory turnover satis 365 days 365 days 1 8.8 = 41.5 days Answer: Days Outstanding in Inventory = 41.5 days