Question

Computing cost of goods sold and operating income, merchandising company

Consider the following partially completed income statements for merchandising companies and compute the missing amounts:

Smith, Inc. Allen, Inc.

Net Sales Revenue \( 101,000 \) (d )

Cost of Goods Sold:

Beginning Merchandise Inventory (a) 29,000

Purchases and Freight In 50,000 (e)

Cost of Goods Available for Sale (b) 89,000

Ending Merchandise Inventory (2,200) (2,200)

Cost of Goods Sold 61,000 (f)

Gross Profit 40,000 114,000

Selling and Administrative Expenses (c ) 84,000

Operating Income \( 12,000 \) (g)

Short answer

The required income statement is completed as per the given data.

Step-by-step solution

Computation Net sales revenue

Net Sales Revenue=COGS+Gross Profit

=$86,800+$114,000

=$200,800

Income statement

Income Statement
	Smith Inc ($)	Allen Inc ($)
Net Sales Revenue (86,800+114,000)	$101,000	D $200,800
Cost of Goods Sold:
Beginning Merchandise Inventory (63,200-50,000)	A $13,200	$29,000
Purchases and Freight In (89,000-29,000)	$50,000	E $60,000
Cost of goods available for sale (61,000+2,200)	B $63,200	$89,000
Ending Merchandise Inventory	-$2,200	-$2,200
Cost of goods sold (89,000-2,200)	$61,000	F $86,800
Gross profit	$40,000	$114,000
Selling and administrative expenses (40,000-12,000)	C $28,000	$84,000
Operating Income (114,000-84,000)	$12,000	G $30,000