ADM 1370 Chapter 2-8: Accounting Notes 2-8

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ochrekoala138

10 Apr 2018

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Income measurement process: sales revenue- the main source. Expenses are divided into two categories: the cost of goods sold is the total cost of the merchandise that was sold during the period. This expense is directly related to the revenue that is recognized from the sale of goods. Sales revenue less the cost of goods sold is called gross profit. (kimmel 224: after gross profit is calculated, operating expenses are deducted to determine profit before income tax. Operating expenses are expenses that are incurred in the process of earning sales revenue. (kimmel 224) Inventory system: flow of costs for a merchandising company, beggingin inventory + purchases = cost of goods avalible for sale, once sold theses costs are assigned to cost of goods sold, goods left over are ending inventory. Cost of goods sold= beginning inventory + cost of purchases less ending inventory: ex.

Related Questions

Consider the following partially completed income statements for merchandising companies and compute the missingâ amounts under the Flynt Corp. table below the following Data Table:

â view the Incomeâ Statements:

Data Table :

		Rustic Gear		Flynt Corp.
Sales		$	98,000	$	(d)
Cost of Goods Sold:
	Beginning Merchandise Inventory		(a)		31,000
	Purchases and Freight In		50,000		(e)
	Cost of Goods Available for Sale		(b)		91,000
	Ending Merchandise Inventory		(2,200)		(2,200)
	Cost of Goods Sold		63,000		(f)
Gross Profit			35,000		114,000
Selling and Administrative Expenses			(c)		86,000
Operating Income		$	10,000	$	(g)

		Rustic Gear
Sales		$98,000
Cost of Goods Sold:
	Beginning Merchandise Inventory	15,200
	Purchases and Freight In	50,000
	Cost of Goods Available for Sale	65,200
	Ending Merchandise Inventory	(2,200)
	Cost of Goods Sold	63,000
Gross Profit		35,000
Selling and Administrative Expenses		25,000
Operating Income		$10,000

	Flynt Corp.

	__?___
	$31,000
	__?___
	91,000
	(2,200)

	114,000
	86,000
	__?____

The income statement of Vince Gill Company is shown below.

	Vince Gill Company
	Income Statement
	For year ended December 31, 2014
Sales Revenue		$6,947,090
Cost of Goods Sold
Beginning inventory	$1,890,710
Purchases	4,323,810
Goods available for sale	6,214,520
Ending inventory	1,601,450
Cost of goods sold		4,613,070
Gross Profit		2,334,020
Operating expenses
Selling expenses	446,970
Admin expenses	709,920	1,156,890
Net income		1,177,130

1.		Accounts receivable decreased $316,040 during the year.
2.		Prepaid expenses increased $175,400 during the year.
3.		Accounts payable to suppliers of merchandise decreased $283,580during the year.
4.		Accrued expenses payable decreased $115,830 during theyear.
5.		Administrative expenses include depreciation expense of$54,760.

Prepare the operating activities section of the statement ofcash flows using the direct method.

rubymouse253

Exercise 23-3

The income statement of Pharoah Company is shownbelow.

PHAROAH COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017
Sales revenue		$7,430,000
Cost of goods sold
Beginning inventory	$2,090,000
Purchases	4,770,000
Goods available for sale	6,860,000
Ending inventory	1,440,000
Cost of goods sold		5,420,000
Gross profit		2,010,000
Operating expenses
Selling expenses	440,000
Administrative expenses	690,000	1,130,000
Net income		$880,000

Additional information:

1.		Accounts receivable decreased $350,000 during the year.
2.		Prepaid expenses increased $150,000 during the year.
3.		Accounts payable to suppliers of merchandise decreased $260,000during the year.
4.		Accrued expenses payable decreased $130,000 during theyear.
5.		Administrative expenses include depreciation expense of$60,000.

Prepare the operating activities section of the statement of cashflows for the year ended December 31, 2017, for Pharoah Company,using the indirect method. (Show amounts that decreasecash flow with either a - sign e.g. -15,000 or in parenthesis e.g.(15,000).)

coralox210

ADM 1370 Chapter 2-8: Accounting Notes 2-8

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