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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

Expert verified

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

Step by step solution

01

Computation Net sales revenue

Net Sales Revenue=COGS+Gross Profit

=$86,800+$114,000

=$200,800

02

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

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