Question

The following information was drawn from the Year 1 accounting records of Ozark Merchandisers:

1. Inventory that had cost $19,800 was sold for $33,660 under terms 2/20, net/30.
2. Customers returned merchandise to Ozark five days after the purchase. The merchandise had been sold for a price of $1,152. The merchandise had cost Ozark $720.
3. All customers paid their accounts within the discount period.
4. Selling and administrative expenses amounted to $3,366.
5. Interest expense paid amounted to $280.
6. Land that had cost $6,800 was sold for $8,160 cash.

Required
a. Determine the amount of net sales. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

b. Prepare a multistep income statement. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Amounts to be deducted and losses should be indicated with a minus sign.)

c. Where would the interest expense be shown on the statement of cash flows?

• Operating activities

• Investing activities

• Financing activities

d. How would the sale of the land be shown on the statement of cash flows?

• The full sales price of the land, $8,160, would be shown as a cash inflow from financing activities on the statement of cash flows.

• The full sales price of the land, $8,160, would be shown as a cash inflow from investing activities on the statement of cash flows.

• The full sales price of the land, $8,160, would be shown as a cash inflow from operating activities on the statement of cash flows

Answer 1

calculation of net sales	amount ($)
gross sales	33660
less sales returns	-1152
less discount	-650
net sales	31858
Income statement (amounts in $)
net sales	31858
less cost of goods sold	-19080
gross profit	12778
selling and administrative	-3366
gain on sale of land	1360
operating income	10772
less interest expenses	-280
income before taxes	10492

Part C - operating activities

Part D - investing activities on the cash flow statement