Question

Junker's Stash started the Year 2 accounting period with the balances given the following horizontal financial statements model. During Year 2, Junker's Stash experienced the following business events: 1. Paid cash to purchase $70,000 of merchandise inventory. 2. The goods that were purchased in Event 1 were delivered POB destination. Transportation costs of $1,400 were paid in cash by the responsible party. 3a. Sold merchandise for $72,000 under terms 1/10, n/30. 36. Recognized $41,900 of cost of goods sold. 4a. Junker's Stash customers returned merchandise that was sold for $2,100. 4b. The merchandise returned in Event 4a had cost Junker's Stash $1,250. 5. The merchandise in Event 3a was sold to customers FOB destination Transportation costs of $1,650 were paid in cash by the responsible party 6a. The customers paid for the merchandise sold in Event 3a within the discount period. Recognized the sales discount 6b. Collected the balance in the accounts receivable account 7. Paid cash of $6,850 for selling and administrative expenses. 8. Sold the land for $9,100 cash. Required a. Record the above transactions in a horizontal financial statements model. b. Determine the amount of net sales. c. Prepare a multistep income statement. Include common size percentages on the income statement d. The return-on-sales ratio for Junker's Stash during the prior year was 12 percent. Based on the common size data in the income statement, did the expenses for Junker's Stash increase or decrease in Year 2? Assume sales are the same for both years.

Answer 1

									JUNKER'S STASH
										Financial Statement Model
						Balance Sheet		Income statement
													Revenue/Gain	-	Expense/Loss	=	Net Income
Bal.	Cash	+	Accounts Receivable	+	Inventory	+	Land	=	Common stock	+	Retained Earnings
op.bal	80000				15000		11000		70000		36000				15000
1	-70000				70000										70000
2	-1400														1400
3a			72000										72000
3b					-41900
4a			-2100												2100
4b					1250
5
6a			-699												699
6b	69201		-69201
7	-6850														6850
8	9100						-9100
													44350
Bal	80051		0		44350		1900		70000		36000		116350		96049		20301
											20301
cls balace	80051				44350		1900	126301	70000		56301	126301
					JUNKER'S STASH
					INCOME STATEMENT FOR THE YEAR ENDED DEC 31 YEAR 2
						Saless		72000
						Returns		2100		69900
						Closing stock			44350
										114250
						opening stock			15000
						operating Expense			78949
										93949
						Net profit			20301