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
| Sales | $225,600 |
|---|---|
| Less: Sales discounts | 2,250 |
| Sales returns and allowances | 12,000 |
| Net sales | $211,350 |
| 2. | Cost of Merchandise purchased |
| Invoice cost of merchandise purchased | $ 92,000 |
|---|---|
| Purchase discounts received | (2,000) |
| Purchase returns and allowances | (4,500) |
| Costs of transportation-in | 4,600 |
| Total cost of merchandise purchased | $ 90,100 |
3. Multiple-step income statement