Question

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows. Debit Credit Merchandise...

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

Debit Credit
Merchandise inventory $ 37,500
Other (noninventory) assets 150,000
Total liabilities $ 43,313
Common stock 10,000
Retained earnings

114,091

Dividends 8,000
Sales 256,500
Sales discounts 3,924
Sales returns and allowances 16,929
Cost of goods sold 99,306
Sales salaries expense 35,141
Rent expense—Selling space 12,056
Store supplies expense 3,078
Advertising expense 21,803
Office salaries expense 32,063
Rent expense—Office space 3,078
Office supplies expense 1,026
Totals $ 423,904 $ 423,904

On August 31, 2016, merchandise inventory was $30,263. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases $ 110,250
Purchases discounts received 2,315
Purchases returns and allowances 5,292
Costs of transportation-in 3,900

  

1. Compute the company’s net sales for the year.
2. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.

Homework Answers

Answer #1
1
Sales 256500
Less: Sales discounts (3924)
Sales returns and allowances (16929)
Net sales 235647
2
VALLEY COMPANY
Income Statement
For Year Ended August 31, 2017
Sales 256,500
Less: Sales discounts 3,924
Less: Sales returns and allowances 16,929 20853
Net sales 235,647
Cost of goods sold 99,306
Gross profit 136,341
Expense
Selling expenses
Sales salaries expense 35,141
Rent expense - Selling space 12,056
Store supplies expense 3,078
Advertising expense 21,803
Total selling expenses 72,078
General and administrative expenses
Office salaries expense 32,063
Rent expense - Office space 3,078
Office supplies expense 1026
Total general and administrative expenses 36,167
Total expenses 108,245
Net income 28,096
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