Question

Problem 4 The following were selected ledger accounts of Sandy Corporation at December 31, 2017: Inventory (as of Jan. 1, 2017) 968,400 Office expense 60,480 Sales revenue 7,687,800 Insurance expense 43,740 Purchases 4,879,800 Freight-out 168,840 Sales discounts 57,600 Depreciation of office equipment 91,980 Purchase discounts 45,000 Depreciation of sales equipment 63,000 Salaries and wages (sales) 513,000 Telephone and Internet expense (sales) 32,040 Salaries and wages (administrative) 615,600 Utilities expense (administrative) 55,800 Purchase returns and allowances 27,000 Interest income 2,000 Sales returns and allowances 136,800 Loss on disposal of equipment 17,000 Freigh-in 124,200 Sales commission expense 146,700 Sandy’s effective tax rate on all items is 30%. A physical inventory count on 12/31/2017 indicated that ending inventory was $386,000.

1. Calculate net sales for 2017

2. Calculate cost of goods sold for 2017

3. Calculate total selling expenses for 2017

4. Calculate total administration expenses for 2017

5. Prepare a condensed multi-step 2017 income statement for Sandy Corporation, showing expenses by nature.

Answer 1

1.Net sales for 2017:

Net Sales
Sales revenue	$7,687,800
(Less): Sales discount	($57,600)
Sales returns and allowances	($136,800)
Net sales	$7,493,400

2.Cost of goods sold for 2017:

Cost of goods sold
Inventory as of Jan. 1, 2017 (Beginning)		$968,400
Purchases	$4,879,800
Purchase discount	($45,000)
Purchase returns and allowances	($27,000)
Net purchases		$4,807,800
Freight-in		$124,200
Total cost of goods available for sale		$5,900,400
Inventory as of Dec. 31, 2017 (Ending)		($386,000)
Cost of goods sold		$5,514,400

3. Total selling expenses for 2017:

Selling expenses
Depreciation expense-Sales equipment	$63,000
Salaries and wages (sales)	$513,000
Telephone and Internet expense (sales)	$32,040
Sales commission expense	$146,700
Freight-out	$168,840
Total	$923,580

4. Total administration expenses for 2017:

Administrative expenses
Office expense	$60,480
Insurance expense	$43,740
Depreciation expense-Office equipment	$91,980
Salaries and wages (administrative)	$615,600
Utilities expense (administrative)	$55,800
Total	$867,600

5.Multi-step income statement:

Sandy Corporation
Income Statement
For the year ended December 31,2017
Net sales		$7,493,400
Cost of goods sold		($5,514,400)
Gross profit		$1,979,000
Operating expenses:
Selling expenses	$923,580
Administrative expenses	$867,600
Total operating expenses		$1,791,180
Operating income		$187,820
Other revenues(expenses):
Interest income		$2,000
Loss on disposal of equipment		($17,000)
Income before income tax		$172,820
Income tax expense [$172,820 x 30%]		($51,846)
Net income		$120,974