2 The following account titles and balances were taken from the adjusted trial balance of King Co. for Year 2. The company uses the periodic inventory system, Dok Account Title Sales returns and allowances Miscellaneous expense Transportation-out Sales Advertising expense Salaries expense Transportation-in Purchases Interest expense Merchandise inventory, January 1 Rent expense Merchandise inventory, December 31 Purchase returns and allowances Loss on sale of land Utilities expense Balance $ 3,500 900 2,200 156,300 6,200 21,000 3,800 88,000 250 11,200 12,000 10,700 2,100 3,100 1,850 Required: a. Prepare a schedule to determine the amount of cost of goods sold. (Amounts to be deducted should be indicated with minus sign.) KING CO. Schedule of Cost of Goods Sold For the Year Ended December 31, Year 2 Beginning merchandise inventory $ Purchases Purchase returns and allowances 11,200 88,000 (2.100) Cost of goods available for sale Less Ending merchandise inventory Cost of goods sold 97.100 (10,700) 86,400 $ 2 KING CO. Income Statement For the Year Ended December 31, Year 2 $ 156,300 (3,500) Book $ 152,800 (86,400) 66,400 Sales Merchandise inventory Sales returns and allowances Net sales Cost of goods sold Gross margin Operating expenses Miscellaneous expense Transportation-out Advertising expense Salaries expense Rent expense Utilities expense $ 900 2,200 6,200 21,000 12,000 1,850 3,500 + Total operating expense Operating income Non-operating items (47,650) 18,750 Interest expense Loss on sale of land Net income $ $ (250) (3.100) 15,400 KING CO. Income Statement For the Year Ended December 31, Year 2 $ 156,300 Sales Merchandise inventory Sales returns and allowances Net sales (3,500) $ 152,800 $ Operating expenses Cost of goods sold Miscellaneous expense Transportation-out 86,400 900 2,200 6,200 21,000 12,000 Advertising expense Salaries expense Rent expense Utilities expense Total expenses Non-operating items Interest expense Loss on sale of land 1,850 (130,550) (250) (3,100) Net income (loss) $ 18,900