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Tuesday, 24 September 2013

BizKid Company’s adjusted trial balance on August 31, 2011, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 32,000 Other (noninventory) assets 128,000 Total liabilities $ 36,960 Common stock 64,560 Retained earnings 43,076 Dividends 8,000 Sales 218,880 Sales discounts 3,349 Sales returns and allowances 14,446 Cost of goods sold 85,312 Sales salaries expense 29,987 Rent expense—Selling space 10,287 Store supplies expense 2,627 Advertising expense 18,605 Office salaries expense 27,360 Rent expense—Office space 2,627 Office supplies expense 876 Totals $ 363,476 $ 363,476 On August 31, 2010, merchandise inventory was $25,824. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs. Invoice cost of merchandise purchases $ 94,080 Purchase discounts received 1,976 Purchase returns and allowances 4,516 Costs of transportation-in 3,900


BizKid Company’s adjusted trial balance on August 31, 2011, its fiscal year-end, follows.
      
        


Debit


Credit

  Merchandise inventory

$
32,000




  Other (noninventory) assets


128,000




  Total liabilities




$
36,960

  Common stock





64,560

  Retained earnings





43,076

  Dividends


8,000




  Sales





218,880

  Sales discounts


3,349




  Sales returns and allowances


14,446




  Cost of goods sold


85,312




  Sales salaries expense


29,987




  Rent expense—Selling space


10,287




  Store supplies expense


2,627




  Advertising expense


18,605




  Office salaries expense


27,360




  Rent expense—Office space


2,627




  Office supplies expense 


876




        







  Totals

$
363,476

$
363,476

       












      
On August 31, 2010, merchandise inventory was $25,824. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs.
       
          


  Invoice cost of merchandise purchases
$
94,080  
  Purchase discounts received

1,976  
  Purchase returns and allowances

4,516  
  Costs of transportation-in

3,900

1.
Compute the company’s net sales for the year.


     





  Sales

$
218,880


  Less: Sales discounts


(3,349
)

           Sales returns and allowances


  (14,446
)

     





  Net sales

$
201,085



2.
Compute the company’s total cost of merchandise purchased for the year.

  Cost of Merchandise purchased:





  Invoice cost of merchandise purchased

$
94,080


  Purchase discounts received


(1,976
)

  Purchase returns and allowances


  (4,516
)

  Costs of transportation-in


3,900


     





  Total cost of merchandise purchased

$
91,488



3.
Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.

 
Explanation:
  Cost of goods sold (alternative computation):


  Merchandise inventory, August 31, 2010
$
25,824  
  Total cost of merchandise purchased (from part 2)

91,488  
    


  Merchandise available for sale

117,312  
  Merchandise inventory, August 31, 2011

32,000  
    


  Cost of goods sold
$
85,312  
   



4.
Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.