Question

Barkley Company’s adjusted trial balance on March 31, 2017, its fiscal year-end, follows.

	Debit	Credit
Merchandise inventory	\(56,500
Other (noninventory) assets	202,600
Total liabilities		\)42,500
Common stock		10,000
Retained earnings		154,425
Dividends	3,000
Sales		332,650
Sales discount	5,875
Sales return and allowance	20,000
Cost of goods sold	115,600
Sales salaries expenses	44,500
Rent expenses – selling space	16,000
Store supplies expenses	3,850
Advertising expenses	26,000
Office salaries expenses	40,750
Rent expenses – office space	3,800
Office supplies expenses	1,100
Total	\(539,575	\)539,575

On March 31, 2016, merchandise inventory was \(37,500. Supplementary records of merchandising activities for the year ended March 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases	\)138,500
Purchase discount received	2,950
Purchase return and allowances	6,700
Cost of transportation-in	5,750

Required

1. Compute the company’s net sales for the year.

2. Compute the company’s total cost of merchandise purchased for the year.

3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Short answer

Answer

The business entity has a net income of$55,765.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Income Statement

The statement prepared by an accountant that represents the net benefits generated by a business entity by reporting their expenses and revenue, is known as an income statement.

Calculation of net sales

Particular	Amount $
Sales	$332,650
Less: Sales return and allowances	(20,000)
Less: Sales discount	(5,875)
Net sales	$306,775

Total cost of merchandise purchased for the year

Particular	Amount $
Invoice cost of merchandise purchased	$138,500
Less: Purchase discount received	(2,950)
Less: Purchase return and allowance	(6,700)
Add: Cost of transportation in	5,750
Total cost of merchandise purchased	$134,600

Multi-step income statement

Particular	Amount $	Amount $
Net sales		$306,775
Less: Cost of goods sold		(115,600)
Gross profit		191,175
Less: Other expenses
Selling expenses
Sales salaries expenses	(44,500)
Rent expenses – selling space	(16,000)
Advertising expenses	(26,000)	(86,500)
Office expenses
Office salaries expenses	(40,750)
Rent expenses – office space	(3,800)
Office supplies expenses	(1,100)
Store supplies expenses	(3,850)	(49,500)
Net income		$55,175

Single-step income statement

Particular	Amount $
Net sales	$306,775
Less: Cost of goods sold	(115,600)
Sales salaries expenses	(44,500)
Rent expenses – selling space	(16,000)
Store supplies expenses	(3,850)
Advertising expenses	(26,000)
Office salaries expenses	(40,750)
Rent expenses – office space	(3,800)
Office supplies expenses	(1,100)
Net income	$55,175