Salon Secrets is a retail chain specializing in salon-quality hair care products

Question

Salon Secrets is a retail chain specializing in salon-quality hair care products. During the year, Salon Secrets had sales of $38,230,000. The company began the year with $3,270,000 of merchandise inventory and ended the year with $3,920,000 of inventory During the year, Salon Secrets purchased $23,450,000 of merchandise inventory. The company's selling, general, and administrative expenses totalled $6,115,000 for the year Prepare Salon Secrets's income statement for the year. S2-111 Prepare a retailer's income statement (Learning Objective 5) S2.12 Calculate direct materials used (Learning Objective 5) You are a new accounting intern at Sunny's Bikes. Your boss gives you the following infor- mation and asks you to compute the cost of direct materials used (assume that the com- pany's raw materials inventory contains only direct materials). Purchases of direct materials. Import duties. Freight-in. Freight-out. Ending raw materials inventory. Beginning raw mater als inventory .$16,000 .. 1,000 500 1,000 1,500 400

Explanation / Answer

Income statement Particulars Amount Amount a sales $        38,230,000 b Opening inventory $    3,270,000 c Purchase $ 23,450,000 d Closing inventory $ (3,920,000) e Cost of goods sold (b+c-d) $        22,800,000 f Gross profit (a-e) $        15,430,000 g S & G exp $          6,115,000 h Net Income (f-g) $          9,315,000 Particulars Amount Purchase $          16,000 Add: Import duty $            1,000 Add: Freight In $ 500 Less: Ending Inventory $          (1,500) Add: Opening inventory $            4,000 Cost of direct material used $          20,000

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