Estimating Inventory and Preparing Multiple-Step and Single-Step Income Statements

Assignment: Estimating Inventory and Preparing Multiple-Step and
Single-Step Income Statements

• Resource: Fundamental Accounting Principles, pp. 251 and 256

• Due Date: Day 7 [Individual] forum

• Complete Problems 5-4A on p. 212, 6-1A on p. 251, and 6-6B and 6-7B
on p. 256.

• Post your answers as an attachment.

Problem 5-4A

Computing merchandising amounts and formatting income statements

BizKid Company’s adjusted trial balance on August 31, 2005, its fiscal
year-end, follows:

On August 31, 2004, merchandise inventory was $25,000. Supplementary
records of merchandising activities for the year ended August 31, 2005,
reveal the following itemized costs:

Invoice cost of merchandise purchases . . . . . . . $91,000

Purchase discounts received . . . . . . . . . . . . . . . 1,900

Purchase returns and allowances . . . . . . . . . . . . 4,400

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 selling expenses and for 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.

Check (2) $88,600;

(3) Gross profit, $112,150;

Net income, $22,750;

(4) Total expenses, $172,000