Problem 5-3A Computing merchandising amounts and formatting income statements Lo

Question

Problem 5-3A Computing merchandising amounts and formatting income statements Lo C2, P4 Valley Company's adjusted trial balance on August 31, 2017, its fiscal year-end, follows Debit S 31,000 124,800 Credit Merchandise inventory Other (noninventory) assets Total liabilities K. Valley, Capital K. Valley, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Sales salaries expense Rent expense-Selling space Store supplies expense Advertising expense Office salaries expense Rent expense-Office space Office supplies expense Totals 35,805 184,641 8,800 212,040 3,244 13,995 82,768 29,049 9,966 2, 544 18,023 26, 5e5 2, 544 $352,486 $352,486 On August 31, 2016, merchandise inventory was $25,017. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs. Invoice cost of merchandise purchases Purchases discounts received Purchases returns and allowances Costs of transportation-in 91,140 1,914 4,375

Explanation / Answer

1. Compute the company’s net sales for the year. Net sales Sales $212,040 Less: Sales discounts -$3,244 Sales returns and allowances -$13,995 Net sales $194,801 2. Compute the company’s total cost of merchandise purchased for the year. Cost of Merchandise purchased Invoice cost of merchandise purchased. $91,140 Purchase discounts received -$1,914 Purchase returns and allowances -$4,375 Costs of transportation-in $3,900 Total cost of merchandise purchased $88,751 3. Multiple-step income statement VALLEY COMPANY Income Statement For Year Ended August 31, 2017 Sales $212,040 Less: Sales discounts -$3,244 Sales returns and allowances -$13,995 Net Sales $194,801 Cost of goods sold -$82,768 Gross Profit $112,033 Expenses Selling expenses Sales salaries expense $29,049 Rent expense—Selling space $9,966 Store supplies expense $2,544 Advertising expense $18,023 Total Selling Expenses $59,582 General and administrative expenses Office salaries expense $26,505 Rent expense—Office space $2,544 Office supplies expense $848 Total general and administrative expenses $29,897 Total expenses $89,479 Net Income $22,554 4) Single-step income statement VALLEY COMPANY Income Statement For Year Ended August 31, 2017 Net Sales $194,801 Expenses Cost of goods sold $82,768 Selling expenses $59,582 General and administrative expenses $29,897 Total expenses $172,247 Net Income $22,554

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