Question

Fill in the blanks (a) through (g) for the Morrison Company for each of the income statements for years 1, 2, and 3

sales	7500	10000	(f)
cost of goods sold	(a)	375	750
Merchandise Inventory (beginning)	2400	3635	4875
Total cost of merchandise purchases	2400	3625	4875
Merchandise Inventory (ending)	(b)	750	625
Cost of Goods Sold	2770	(d)	5000
Gross profit	(c)	6750	5200
Operating Expenses	3750	3750	(g)
Net Income	980	(e)	2500

 

Answer 1

Before solving this question, you have to under stand accounting equation for income statement.

it is: Net income = Gross profit - Operating expenses

Gross profit = Sales - Cost of goods sold

Cost of goods sold = Begining inventory + Merchandise purchases - Ending inventory

Sales	$                                                                 7,500	$                                         10,000	$5,000+$5,200 = $10,200
Cost of goods sold
Merchandise inventory (beginning)	$2,770+$375-$2400 = $745	$                                               375	$                                         750
Total cost of merchandise purchase	$                                                                 2,400	$                                           3,625	$                                      4,875
Merchandise inventory (Ending)	$375 (Beginning inventory of year 2)	$                                               750	$                                         625
Cost of goods sold	$                                                                 2,770	$375+$3,625-$750 = $3,250	$                                      5,000
Gross profit	$3,750+$980 = $4,730	$                                           6,750	$                                      5,200
Operating expenses	$                                                                 3,750	$                                           3,750	$5,200-$2,500 = $2,700
Net income	$                                                                    980	$6,750-$3,750 = $3,000	$                                      2,500