Question

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

		Debit			Credit
Merchandise inventory		$	38,000
Other (noninventory) assets			152,000
Total liabilities					$	43,890
K. Valley, Capital						125,585
K. Valley, Withdrawals			8,000
Sales						259,920
Sales discounts			3,977
Sales returns and allowances			17,155
Cost of goods sold			100,577
Sales salaries expense			35,609
Rent expense—Selling space			12,216
Store supplies expense			3,119
Advertising expense			22,093
Office salaries expense			32,490
Rent expense—Office space			3,119
Office supplies expense			1,040
Totals		$	429,395		$	429,395

On August 31, 2016, merchandise inventory was $30,666. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	111,720
Purchases discounts received		2,346
Purchases returns and allowances		5,363
Costs of transportation-in		3,900

  
Required:

1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Answer 1