The university book store has just completed its busy fall season. Taking the fo
ID: 2498868 • Letter: T
Question
The university book store has just completed its busy fall season. Taking the following facts into consideration, construct an income statement for the month ending September 30.
a. Sales, both cash and on account, totaled $2,000,000.
b. Salary and wages equaled 14 percent of sales.
c. All items were priced to sell at 1.6 times their cost.
d. Insurance expense for the period was $3,000.
e. Miscellaneous expense equaled 2 percent of cost of goods sold.
f. Advertising and promotion cost 5 percent of sales.
g. Because the store is run by the university foundation, no taxes are levied.
Compute NET INCOME for September.
$218,000
$342,000
$286,000
$312,000
$218,000
$342,000
$286,000
$312,000
Explanation / Answer
Net Income = Incomes - Expenses
= 2000000 - 1658000
= 342000
Correct answer is option B
Expenses Amount Incomes Amount Purchase(2000000/1.6) 1250000 Sales 2,000,000 Salary (14%*2000000) 280000 Insurance Expense 3000 Miscellaneous expense(2%*1250000) 25000 Advertising(5%*2000000) 100000 TOTAL 1658000 2000000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.