Question

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

		Debit			Credit
Merchandise inventory		$	34,500
Other (noninventory) assets			138,000
Total liabilities					$	39,848
Common stock						10,000
Retained earnings						105,114
Dividends			8,000
Sales						235,980
Sales discounts			3,610
Sales returns and allowances			15,575
Cost of goods sold			91,673
Sales salaries expense			32,329
Rent expense—Selling space			11,091
Store supplies expense			2,832
Advertising expense			20,058
Office salaries expense			29,498
Rent expense—Office space			2,832
Office supplies expense			944
Totals		$	390,942		$	390,942

On August 31, 2016, merchandise inventory was $27,842. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	101,430
Purchases discounts received		2,130
Purchases returns and allowances		4,869
Costs of transportation-in		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