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Preparing an income statement and calculating unit cost for a merchandising company

Clyde Conway owns Clyde’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records of Clyde’s Pets showed the following:

Merchandise Inventory on December 31, 2018 $ 10,100

Merchandise Inventory on January 1, 2018 15,900

Net Sales Revenue 56,000

Utilities Expense for the shop 3,300

Rent for the shop 4,100

Sales Commissions 2,650

Purchases of Merchandise Inventory 25,000

Requirements

1. Prepare an income statement for Clyde’s Pets for the year ended December 31, 2018.

2. Clyde’s Pets sold 3,850 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent

Short Answer

Expert verified

The net operating income is $15,150 and the unit cost is $8.00

Step by step solution

01

Step-by-Step SolutionStep 1 Preparation of Income Statement

Clyde’s Pet
Income Statement
Year Ended December 31, 2018

Amount ($)

Amount ($)

Revenues:

Net Sales Revenue

$56,000

Cost of goods sold:

Beginning Merchandise Inventory

$15,900

Purchase of Merchandise

$25,000

Cost of goods available for sale

$40,900

Ending merchandise inventory

-$10,100

Cost of goods sold

$30,800

Gross Profit

$20,200

Selling and administrative Expenses:

Utilities Expense

$3,300

Rent Expense

$4,100

Sales Commission Expense

$2,650

Total selling and administrative expenses

$10,050

Operating Income

$15,150

02

Computation of unit cost

UnitCost=CostofgoodssoldTotalUnitsSold=$30,8003,850=$8.00

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