Question

Memphis Company Data: Net sales $120,000 Beginning merchandise inventory $ 50,000 Ending merchandise inventory $ 35,000 Purchases $ 85,000 Purchase Returns $ 5,000 Freight-in $ 7,000 Operating expenses $ 40,000 Required: Prepare the multi-step income statement. The company uses the periodic inventory system.

Answer 1

Memphis company multiple step income statement are accurately presented below

Memphis Company

Income statement

Particulars	$	$
Net Sales		120,000
cost of goods sold:
Beginning inventory	50,000
Add purchase	85,000
Add freight in	7,000
Less purchase returns	(5,000)
Cost of merchandise available for sales	137,000
Less Ending merchandise inventory	(35,000)
Less Cost of goods sold		102,000
Gross profit		18,000
Less operating expenses		(40,000)
Net loss		(22,000)

The Memphis company cost of goods sold is $102,000 and cost of goods available for sales $137,000.

$120,000 is the net sales of Memphis company and the gross profit of Memphis is $18,000.

Memphis net loss is $22,000 , because operating expenses $40,000 is greater than operating income $18,000.

15% is the gross margin of Memphis company (18,000 / 120,000).