2-30 Cost of goods purchased, cost of goods sold, and income statement. The foll

Question

2-30 Cost of goods purchased, cost of goods sold, and income statement. The following data are for Montgomery Retail 0utlet Stores. The account balances (in thousands) are for 2011 Marketing and advertising costs Merchandise inventory, January 1, 2011 Shipping of merchandise to customers S 24,000 45,000 2,000 ASSIGNMENT MATERIAL Building depreciation Purchases General and administrative costs Merchandise inventory, December 31, 2011 Merchandise freight-in Purchase returns and allowances Purchase discounts Revenues $ 4,200 260,000 32,000 52,000 10,000 11,000 9,000 320,000 1. Compute (a) the cost of goods purchased and (b) the cost of goods sold. 2. Prepare the income statement for 2011 Required

Explanation / Answer

1a Schedule of Cost of Goods Purchased For the Year Ended December 31, 2011 Purchases 260000 Add freight—in 10000 270000 Deduct: Purchase returns and allowances 11000 Purchase discounts 9000 20000 Cost of goods purchased 250000 b Schedule of Cost of Goods Sold For the Year Ended December 31, 2011 Beginning merchandise inventory 1/1/2011 45000 Cost of goods purchased 250000 Cost of goods available for sale 295000 Deduct: Ending merchandise inventory 12/31/2011 52000 Cost of goods sold 243000 2 Income Statement For the Year Ended December 31, 2011 Revenues 320000 Cost of goods sold 243000 Gross margin 77000 Operating costs: Marketing and advertising costs 24000 Building depreciation 4200 Shipping of merchandise to customers 2000 General and administrative costs 32000 Total operating costs 62200 Operating income 14800

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