Financial Accounting Fundamentals
Financial Accounting Fundamentals
6th Edition
ISBN: 9781259726910
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 4, Problem 1E
To determine

Calculate the missing amounts of the income statement a through e.

Expert Solution & Answer
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Answer to Problem 1E

The following table shows the missing amounts of the merchandiser’s profit data.

Particularsa ($)b ($)c ($)d ($)e ($)
Sales62,00043,50046,000

79,000

(9)

25,600
Cost of goods sold     
Merchandise inventory (beginning)8,00017,0507,5008,0004,560
Total cost of merchandise purchases38,000

1,950

(4)

43,750

(7)

32,0006,600
Merchandise inventory (ending)

(11,950)

(1)

(3,000)(9,000)(6,600)

(4,160)

(10)

Cost of goods sold34,05016,000

42,250

(6)

33,400

(8)

7,000
Gross profit

27,950

(2)

27,500

(5)

3,75045,600

18,600

(11)

Less: Expenses(10,000)(10,650)(12,150)(3,600)(6,000)
Net income (loss)

17,950

(3)

16,8508,40042,000

12,600

(12)

Table (1)

Explanation of Solution

Cost of goods sold indicates the costs involved for the inventory sold by the business in a specific period of time. Its mathematical representation is as below:

Cost of Goods Sold=Beginning Inventory+PurchasesEnding Inventory

Gross profit represents the revenue after the deduction of cost of goods sold from the net sales of a business. Its mathematical representation is as below:

Gross profit=Net salesCost of goods sold

Calculate the ending merchandise inventory of a’s income statement.

Cost of goods sold = $34,050

Total cost of merchandise purchase = $38,000

Beginning merchandise inventory = $8,000

Ending merchandise inventory=[(Beginning merchandise inventory+Purchases)Cost of goods sold]=[($8,000+$38,000)$34,050]=$11,950 (1)

Calculate the gross profit of a’s income statement.

Sales = $62,000

Cost of goods sold = $34,050

Gross profit=SalesCost of goods sold=$62,000$34,050=$27,950 (2)

Calculate net income of a’s income statement.

Gross profit = $27,950 (2)

Expenses = $10,000

Net income=Gross profitExpenses=$27,950$10,000=$17,950 (3)

Calculate the total cost of merchandise purchase of b’s income statement.

Cost of goods sold = $16,000

Beginning merchandise inventory = $17,050

Ending merchandise inventory = $3,000

Purchases=[(Cost of goods sold+Ending merchandise inventory)Beginning merchandise inventory]=[($16,000+$3,000)$17,050]=$1,950 (4)

Calculate the gross profit of b’s income statement.

Sales = $43,500

Cost of goods sold = $16,000

Gross profit=SalesCost of goods sold=$43,500$16,000=$27,500 (5)

Calculate the cost of goods sold of c’s income statement.

Sales = $46,000

Gross profit = $3,750

Cost of goods sold=SalesGross profit=$46,000$3,750=$42,250 (6)

Calculate the total cost of merchandise purchase of c’s income statement.

Cost of goods sold = $42,250 (6)

Beginning merchandise inventory = $7,500

Ending merchandise inventory = $9,000

Purchases=[(Cost of goods sold+Ending merchandise inventory)Beginning merchandise inventory]=[($42,250+$9,000)$7,500]=$43,750 (7)

Calculate the cost of goods sold of d’s income statement.

Total cost of merchandise purchase = $32,000

Beginning merchandise inventory = $8,000

Ending merchandise inventory = $6,600

Cost of goods sold=[(Purchases+Beginning merchandise inventory)Endingmerchandise inventory]=[($32,000+$8,000)$6,600]=$33,400 (8)

Calculate the sales of d’s income statement.

Gross profit = $45,600

Cost of goods sold = $33,400 (8)

Sales=Cost of goods sold+Gross profit=$33,400$45,600=$79,000 (9)

Calculate the ending merchandise inventory of e’s income statement.

Cost of goods sold = $7,000

Total cost of merchandise purchase = $6,600

Beginning merchandise inventory = $4,560

Ending merchandise inventory=[(Beginning merchandise inventory+Purchases)Cost of goods sold]=[($4,560+$6,600)$7,000]=$4,160 (10)

Calculate the gross profit of e’s income statement.

Sales = $25,600

Cost of goods sold = $7,000

Gross profit=SalesCost of goods sold=$25,600$7,000=$18,600 (11)

Calculate net income of e’s income statement.

Gross profit = $18,600 (2)

Expenses = $6,000

Net income=Gross profitExpenses=$18,600$6,000=$12,600 (12)

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Chapter 4 Solutions

Financial Accounting Fundamentals

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