Prepare an Income Statement through gross profit for the year endedDecember 31,
ID: 2457859 • Letter: P
Question
Prepare an Income Statement through gross profit for the year endedDecember 31, 2007.At the end of Company A's fiscal year on December 31, 2007, theseaccounts appeared in its adjusted trial balance.
Freight-in $ 5,600
Merchandise Inventory(beginning) 40,500
Purchases 446,000
Purchase Discounts 12,000
Purchase Returns andAllowances 6,400
Sales 727,000
Sales Returns and Allowances 8,000
Additional Facts:
1. Merchandise inventory on December 31,2007 is $71,000.
2. Note that Company A uses a periodic system.
Explanation / Answer
Income Statement
31 dec.2007
$446,000
$5,600
12000
6400
$433,200
Income Statement
31 dec.2007
Revenue: Sales $727,000 sales return -8000 $719,000 Expenses: Cost of goods $402,700 sold Gross profit $316,300 Notes: Cost of goodssold = merchandise inventory(beginning)+ Net purchases - merchandise (ending) NetPurchases = $433,200 purchases$446,000
Add: Freight-in$5,600
less purchase discount12000
less purchase return6400
& allowance Net purchase$433,200
Cost of goodssold = $40500 + $433200 - $71000 = $402,700