Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows — year-end — 2016 merchandise inventory was 400 Supplementary records merchandising

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

On August 31, 2016, merchandise inventory was $25,400. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases ……………………… $92,000

Purchases discounts received ……………………………….. 2,000

Purchases returns and allowances ………………………….. 4,500

Costs of transportation-in ………………………………….. . 4,600

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.

SOLUTION

1. Net sales

3. Multiple-step income statement

VALLEY COMPANY

Income Statement

For Year Ended August 31, 2017

Sales $225,600

Less: Sales discounts $ 2,250

Sales returns and allowances 12,000 14,250

Net sales 211,350

Cost of goods sold * 74,500

Gross profit 136,850

Expenses

Selling expenses

Sales salaries expense 32,000