Question

Alpha Company provided the following data concerning its income statement: sales, $945,000; purchases, $359,000; beginning inventory, $205,000; ending inventory, $262,000; operating expenses, $105,000; freight-in, $5,000; sales discounts, $17,000; purchases discounts, $15,000; sales returns & allowances, $80,000; and purchases returns & allowances, $47,000. The data are complete and provide the basis for preparation of an income statement. How much is net income?

Answer 1

Net Purchase = Purchase- Purchase Discount - Purchase return & allowances

= $359,000 - $15,000 - $47,000 = $297,000

Cost of good sold = Beginning Inventory + Net Purchase + Freight In - Ending Inventory

= $205,000 + $297,000 + $5,000 - $262,000 = $245,000

Income Statement
Sales	$945,000
Less: sales discounts	17000
Less: sales returns & allowances	80000
Net Sales	$848,000
Less: Cost of good sold	245000
Less: operating expenses	105000
Net Income	$498,000