Question

The following account titles and balances were taken from the adjusted trial balance of King Co. for 2018. The company uses the periodic inventory system. Account Title Sales returns and allowances Miscellaneous expense Transportation-out Sales Advertising expense Salaries expense Transportation-in Purchases Interest expense Merchandise inventory, January 1 Rent expense Merchandise inventory, December 31 Purchase returns and allowances Loss on sale of land Utilities expense Balance $ 4,100 800 3,100 161,000 7,100 22,200 3,250 91,000 400 13,200 9,100 11,300 3,100 4,100 2,050 Required: a. Prepare a schedule to determine the amount of cost of goods sold b. Prepare a multistep income statement. c. Prepare a single-step income statement.

Answer 1

1.

KING CO
Schedule of Cost of Goods Sold
For the Year Ended December 31, 2018
Merchandise inventory, January 1	$    13,200
Add:Purchases	$    91,000
Add: transportation in	$      3,250
Less: Purchase return and allowances	$    (3,100)
Cost of goods available for sale	$ 104,350
Less: Merchandise inventory, December 31	$ (11,300)
Cost of goods sold	$    93,050

2.

KING CO
Income Statement
For the Year Ended December 31, 2018
Sales
Sales revenue	$ 161,000
Less: Sales return and allowances	$    (4,100)
Net sales		$ 156,900
Less: Cost of goods sold		$    93,050
Gross profit		$    63,850
Operating expenses
Misc. expenses	$          800
Transportation-out	$      3,100
Advertising expenses	$      7,100
Salaries expense	$    22,200
Rent expense	$      9,100
Utilities expense	$      2,050
Total operating expenses		$    44,350
Income from operations		$    19,500
Non-operating items
Interest expense	$        (400)
Loss on sale of land	$    (4,100)
Total non-operating items		$    (4,500)
Net income		$    15,000

3.

KING CO
Income Statement
For the Year Ended December 31, 2018
Sales
Sales revenue	$ 161,000
Less: Sales return and allowances	$    (4,100)
Net sales		$ 156,900
Operating expenses
Cost of goods sold	$    93,050
Misc. expenses	$          800
Transportation-out	$      3,100
Advertising expenses	$      7,100
Salaries expense	$    22,200
Rent expense	$      9,100
Utilities expense	$      2,050
Total expenses		$ 137,400
Non-operating items
Interest expense	$        (400)
Loss on sale of land	$    (4,100)
Total non-operating items		$    (4,500)
Net income		$    15,000

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