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Gross profit does not appear

1) on a merchandising company income statement.

2) on a service company income statement.

3) to be relevant in analyzing the operation of a merchandising company.

4) on the income statement if the periodic inventory system is used because it cannot be calculated. 

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Joshua Stredder
Joshua StredderLv10
3 Feb 2021
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Related questions

On January 1, 2018, Jana started a small flower merchandising business that she named Jana’s Flowers. The company experienced the following events during the first year of operation:

1.Started the business by issuing common stock for $30,000 cash.

2. Paid $19,000 cash to purchase inventory.

3. Sold merchandise that cost $10,000 for $21,000 on account.

4. Collected $16,000 cash from accounts receivable.

5. Paid $3,750 for operating expenses.

Required

a. Organize ledger accounts under an accounting equation and record the events in the accounts.

b-1. Prepare an income statement.

b-2. Prepare a balance sheet.

b-3.Prepare a statement of cash flows.

c. Since Jana sold inventory for $21,000, she will be able to recover more than half of the $30,000 she invested in the stock. Do you agree with this statement?

The Patel Merchandising Corporation began June operations withmerchandise inventory of 14 units, each of which cost $130. DuringJune, Patel Merchandising made the following purchases: (1) June 6,26 units @ $132 per unit, (2) June 15, 28 units @ $136 per unit,(3) June 26, 32 units @ $140 per unit. During June the Company soldthe following units at a sales price of $220 per unit: June 8, 18units, June 20, 24 units, June 29, 30 units. Operating expenses inJune were $3,200. The Company estimates its income taxes expensewill be approximately 35% of income before taxes.

Using the FIFO inventory method

a) determine the inventory dollar amount on June 1.

b) determine the dollar amount of purchases made in June.

c) determine the cost of goods available for sale duringJune.

d) determine the cost of goods sold during June.

e) determine the inventory dollar amount on June 30.

f) determine the sales dollar amount for June.

g) determine the gross profit for June.

h) determine the income before taxes for June.

i) determine the income taxes expense for June.

j) determine the net income for June.

The Divine Merchandising Corporation began March operations withmerchandise inventory of 6 units, each of which cost $27. DuringMarch, Divine Merchandising made the following purchases: (1) March4, 12 units @ $28 per unit, (2) March 15, 18 units @ $30 per unit,(3) March 26, 14 units @ $32 per unit. During March the DivineMerchandising Company sold the following units at a sales price of$48 per unit: March 6, 11 units, March 20, 17 units, and March 28,12 units. Operating expenses in March were $640. The Companyestimates its income taxes expense will be approximately 35% ofincome before taxes.

Using the FIFO inventory method, determine the gross profit forMarch.

a.

$1,166
b.

$1,920
c.

$754
d.

$3,086
e.

$1,486

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