Question

Valley Company s adjusted trial balance 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. Debit Credit $ 25,000 Merchandise inventory (ending) $ 41,000 Other (noninventory) assets 130,400 Total liabilities Common stock Retained earnings Dividends 8,000 Sales 10,000 94,550 225,600 2,250 12,000 74,500 32,000 8,000 Sales discounts Sales returns and allowances Cost of goods sold Sales salaries expense Rent expense-Selling space Store supplies expense Advertising expense Office salaries expense Rent expense-Office space Office supplies expense Totals 1,500 13,000 28,500 3,600 400 $355,150 $355,150

Answer 1

Part 1

Net sales

$211350

Net sales
Sales	225600
Less: Sales discounts	(2250)
Less: Sales returns and allowances	(12000)
Net sales	$211350

Part 2

Cost of Merchandise purchased
Invoice cost of merchandise purchased	92000
Purchase discounts received	(2000)
Purchase returns and allowances	(4500)
Costs of transportation-in	4600
Total cost of merchandise purchased	$90100

Part 3

VALLEY COMPANY Income Statement For Year Ended August 31
Sales		225600
Less: Sales discounts	2250
Sales returns and allowances	12000	14250
Net sales		211350
Cost of goods sold		74500
Gross profit		136850
Expenses
Selling expenses
Sales salaries expense	32000
Rent expense—Selling space	8000
Store supplies expense	1500
Advertising expense	13000
Total selling expenses		545000
General and administrative expenses
Office salaries expense	28500
Rent expense—Office space	3600
Office supplies expense	400
Total general and administrative expenses		32500
Total expenses		87000
Net income		49850

Cost of goods sold
Merchandise inventory, beginning	25400
Total cost of merchandise purchased	90100
Merchandise available for sale	115500
Merchandise inventory, ending	41000
Cost of goods sold	74500

Part 4

VALLEY COMPANY Income Statement For Year Ended August 31
Net sales		211350
Expenses
Cost of goods sold	74500
Selling expenses	54500
General and administrative expenses.	32500
Total expenses		161500
Net income		$49850