Cost of Merchandise Sold and Multi-Step Income Statement

Practice

Smith Company is a small rug retailer owned and operated by John Smith. After the accounts have been adjusted on December 31, the following selected account balances were taken from the ledger:

Advertising Expense$30,000Merchandise Inventory, December 31233,300Office Equipment Depreciation Expense12,100Freight In6,500Merchandise Inventory, December 1194,000Interest Expense22,400Purchases Returns and Allowances5,200Purchases583,100Increase in Estimated Returns Inventory22,200Purchases Discounts9,300Pat Kirwan, Drawing71,500Sales Salaries Expense136,200Sales933,000

Calculate each of the following amounts

1. Net Purchases

FormulaNumbers

1. Cost of Merchandise Purchased

FormulaNumbers

1. Cost of Merchandise Available for Sale

FormulaNumbers

1. Cost of Merchandise Sold Before Estimated Returns

FormulaNumbers

1. Cost of Merchandise Sold

FormulaNumbers

1. Gross Profit

FormulaNumbersSales-cost of merchandise sold

1. Operating Expenses

FormulaNumbers(Office equipment + store equipment)+ administrative expense + salaries payable + selling expense

1. Income from Operations

FormulaNumbersGross profit- Operating Expense

1. Net Income

FormulaNumbersIncome from operation+ rent revenue- Interest expense