Question

Using the following information, calculate (a) Net sales, (b) Beginning inventory, (c) Cost of goods sold, (d) Gross margin, and (e) Net income (Income after taxes).

                Sales salaries expense                                     $ 7,000

                Sales (gross)                                                    90,000

                Ending Inventory                                            16,000

                Purchase returns and allowances                         500

                General and administrative expenses               8,000

                Selling expenses                                                3,000

                Sales discounts                                                  1,200

                Freight in                                                         1,500

                Freight out                                                        2,500

                Prepaid expenses                                               5,000

                Purchases (gross)                                           30,000

                Cost of goods available for sale                      63,000

                Income taxes rate = 30%

Answer 1

a.

Net sales = Sales - Sales discount

= 90,000 - 1,200

= $88,800

b.

Cost of goods available for sale = Beginning inventory + Purchases -  Purchase returns and allowances + freight in - Ending inventory

63,000 = Beginning inventory + 30,000 - 500 + 1,500 - 16,000

Beginning inventory = 63,000 - 30,000 + 500 - 1,500 + 16,000

= $48,000

c.

Cost of goods sold = Cost of goods available for sale - Ending inventory

= 63,000 - 16,000

= $47,000

D.

Gross margin = Net sales - Cost of goods sold

= 88,800 - 47,000

= $41,800

e.

Income statement

Net sales	88,800
Cost of goods sold	-47,000
Gross margin	41,800
Sales salaries expense	-7,000
General and administrative expenses	-8,000
Selling expenses	-3,000
Freight out	-2,500
Profit before tax	21,300
Income tax expense (21,300 x 30%)	-6,390
Net income	$14,910

Net income = $14,910

kindly give a positive rating if you are satisfied with the solution. Please ask if you have any query related to the question, Thanks.