Use the following information to answer the next 6 questions: The following sele
ID: 2404980 • Letter: U
Question
Use the following information to answer the next 6 questions:
The following selected information is taken from the books of the Rick Company
Cash 2,500 Sales 15,000
Accounts receivable 3,000 Purchases returns and allowances 400
Purchases 9,000 Purchases discounts 300
Sales returns and allowances 150 Accounts Payable 3,000
Sales discounts 350 Allowance for Doubtful Accounts 400
Inventory, 1/1/2007 3,000 Selling expense 400
Inventory, 12/31/2007 2,000 Administrative expense 600
Transportation – out 300 Bad Debt Expense 200
Transportation – in 200 Rent expense 1,000
Dividends 1,500 Insurance expense 500
Net Sales for the period is:
Net Sales = Gross Sales – Sales Discount – Sales return & allowances
*** Net Sales = $15,000-$350-$150 = $14,500
Cost of net purchases for the period is:
Net Purchases = Gross purchases – purchase discount – purchase return
*** Net Purchases = $9,000 - $300 - $400 = $ 8,300
Cost of Goods Available for Sale for the period is:
Cost of Goods Available for Sale = opening inventory + purchases – closing inventory
*** COGS = $3,000 + $8,300 - $2,000 = $9,300
Cost of Goods Sold for the period is:
*** Cost of Goods Available for Sale = Cost of Goods Sold + Closing inventory
Cost of Goods Sold = $9,300 + $2,000 = $11300
Gross Profit for the period is:
*** Gross Profit = net sales – cost of goods sold
Gross Profit = $14,500 - $9,300 = $5,200
Net Income for the period is:
***Net Income = Gross Profit + Operating income – Operating expense
Net Income = $5,200 + dividends received – selling expense – administration expense – bad debt expense – rent expense – insurance expense- transportation in – transportation out
Net Income = $5,200 + $1,500 - $400 - $600 - $200 - $1000 - $500 - $200 - $300 = $3500
Please check if these answers are correct
Explanation / Answer
Net sales calculation is correct
Net purchases calculation is correct
Cost of goods sold calculation is correct
Cost of goods available for sale = Opening inventory + Net purchases
= 3,000 + 8,300
= $11,300
Cost of goods available for sale calculation done by you is also correct.
Gross profit calculation is also correct
Net income calculation is also correct
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