Question

1. Inventory that had cost $24,600 was sold for $36,900 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 $1,612. The merchandise had cost Ozark $1,040.
3. All customers paid their accounts within the discount period.
4. Selling and administrative expenses amounted to $3,690.
5. Interest expense paid amounted to $370.
6. Land that had cost $7,600 was sold for $9,500 cash.

A. Determine the amount of sales

B. Prepare a multistep income statement

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

1. Operating Activities

2. Investing Activities

3. Financing Activities

D. How would the sale of the land be shwon on the statement of cash flows?

1.. The full sales price of the land, $9,500, would be shown as a cash inflow from financing activities on the statement of cash flow

2.The full sales price of the land, $9,500, would be shown as a cash inflow from investing activities on the statement of cash flows.

3.The full sales price of the land, $9,500, would be shown as a cash inflow from operating activities on the statement of cash flows

Answer 1

A.AMOUNT OF SALES= Sales-Sales Return(Merchandise Return)

=36162-1612

=34550

NOTE:Sales=36900-2% of 36900

=36900-738

=36162.

B. MULTIPLE INCOME STATEMENT

Actual Sales(Sales-Sales Return) =34550

-COGS(COGS-COGS return) =23560(24600-1040)

  Gross Profit =10990

-Selling/Adm. Expense = (3690)

Operating Income(A) = 7300

Non operating or Other

Sale of land 1900

-Interest Expense (370)

Total Non operating income(B)   1530

NET INCOME(7300+1530) 8830

C. 1.OPERATING ACTIVITIES

REASON:Interest expense is a non-operating expense shown on the income statement. It represents interest payable on any borrowings like bonds, loans, convertible debt etc.

D. 2.The full sales price of the land, $9,500, would be shown as a cash inflow from investing activities on the statement of cash flows

Reason:As investing activity from cash flow includes the amount of cash inflow and otflow from the sale and purchase of fixed asset the sale of land will be shown as cash flow from investing activity.

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