Question

Evans Company had the following account balances at the end of the year:

Additional Resources

	Beginning Inventory	$41,600			Purchases Returns and Allowances	$5200
	Ending Inventory	37,800			Purchases	78700
	Freight-In	3,700			Sales Discounts	8400
	General and Administrative Expenses	25,000			Sales Returns and Allowances	8300
	Interest Revenue	2,230			Sales	182300
	Interest Expense	1,250			Selling Expenses	20300
	Purchase Discounts	5,300

Required:

Compute the following:

1. Cost of goods purchased
2. Net income, given that income from operations is $44,600.

Answer 1

Purchases = $78,700

Purchase Discounts = $5,300

Purchases Returns and Allowances = $5,200

Freight-In = $3,700

Cost of goods purchased = Purchases - Purchase Discounts - Purchases Returns and Allowances+ Freight-In

= 78,700-5,300-5,200+3,700

= $71,900

Income from operations = $44,600

Interest Revenue = $2,230

Interest Expense = $1,250

Net income =  Income from operations +  Interest Revenue- Interest Expense

= 44,600+2,230-1,250

= $45,580