Question

Consider the data of the following companies which use the periodic inventory system

Company	Net Sales Revenue	Beginning Merchandise Inventory	Net Cost of Purchases	Ending Merchandise Inventory	Cost of Goods Sold	Gross Profit
Large	\( 105,000	\) 23,000	\( 59,000	\) 22,000	(a)	\(45,000
Small	(b)	27,000	94,000	(c)	99,000	40,000
Medium	96,000	(d)	58,000	24,000	68,000	(e)
Petite	80,000	8,000	(f)	6,500	(g)	44,000

Requirements

2. Prepare the income statement for the year ended December 31, 2019, for Large Company, which uses the periodic inventory system. Include a complete heading, and show the full computation of cost of goods sold. Large’s operating expenses for the year were \)12,000.

Short answer

Net income for large company amounts to $33,000.

Step-by-step solution

Computation of cost of goods sold for large company

$\begin{array}{c}\left(a\right)\mathbf{C}\mathbf{O}\mathbf{G}\mathbf{S}\mathbf{=}\mathbf{B}\mathbf{e}\mathbf{g}\mathbf{i}\mathbf{n}\mathbf{n}\mathbf{i}\mathbf{n}\mathbf{g}\mathbf{}\mathbf{I}\mathbf{n}\mathbf{v}\mathbf{e}\mathbf{n}\mathbf{t}\mathbf{o}\mathbf{r}\mathbf{y}\mathbf{+}\mathbf{N}\mathbf{e}\mathbf{t}\mathbf{}\mathbf{P}\mathbf{u}\mathbf{r}\mathbf{c}\mathbf{h}\mathbf{a}\mathbf{s}\mathbf{e}\mathbf{s}\mathbf{-}\mathbf{E}\mathbf{n}\mathbf{d}\mathbf{i}\mathbf{n}\mathbf{g}\mathbf{}\mathbf{I}\mathbf{n}\mathbf{v}\mathbf{e}\mathbf{n}\mathbf{t}\mathbf{o}\mathbf{r}\mathbf{y}\\ \mathbf{=}\mathbf{\$}\mathbf{23}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{59}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{\$}\mathbf{22}\mathbf{,}\mathbf{000}\\ \mathbf{=}\mathbf{\$}\mathbf{60}\mathbf{,}\mathbf{000}\end{array}$

Income statement for large company

LARGE COMPANY

Income Statement

Year Ended Dec 31, 2019

Net Sales Revenue $ 105,000

Less: Cost of Goods Sold 60,000

Gross Profit $ 45,000

Less: Operating Expenses $ 12,000

Gross Profit $ 33,000