As part of a loan agreement with a local bank, Brazos Company must present quarterly and cumulative income statements for the year 1998. The company uses periodic inventory procedure and marks its merchandise to sell at a price yielding a gross margin of \(30 \%\). Selected data for the first six months of 1998 are as follows:

The cost of the physical inventory taken December 31,1997 , was \(\$ 30,400\).

a. Indicate how income statements can be prepared without taking a physical inventory at the end of each of the first two quarters of 1998.

b. Prepare income statements for the first quarter, the second quarter, and the first six months of 1998 .

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First Second Quarter Quarter Sales. Purchases. Purchase returns and allowances $248,000 $256,000 160,000 184,000 9,600 11,200 Purchase discounts. 3,200 3,520 Sales returns and allowances 8,000 4,800 Transportation-in 8,000 8,320 Miscellaneous selling expenses 25,600 24,000 Miscellaneous administrative expenses 9,600 8,000