Loose Leaf for Fundamental Accounting Principles
Loose Leaf for Fundamental Accounting Principles
23rd Edition
ISBN: 9781259687709
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 5, Problem 1E
To determine

Concept Introduction:

Cost of goods sold: It refers to all the costs that a business incurs to produce a product. It is computed by using the formula -

COGS=Beginning Inventory+Net Purchases-Ending Inventory

Revenues (sales): It refers to the income generated by the business from its main operating activities.

Gross Profit: It is derived by deducting the cost of goods sold from its revenues. It depicts the margin that a business is earning from its operating activities.

To Compute: The revenues, expenses and income of the given income statement.

Expert Solution & Answer
Check Mark

Explanation of Solution

a.

COGS=Beginning inventory+Purchases-Ending inventory$34,050=$8,000+$38,000-Ending inventoryEnding inventory=$46,000-$34,050Ending inventory=$11,950Gross Profit=Sales-COGS=62,000-$34,050=$27,950Net Income=Gross Profit-Expenses=$27,950-$10,000=$17,950

b.

COGS=Beginning inventory+Purchases-Ending inventory$16,000=$17,050+Purchases-$3,000Purchases=$19,000-$17,050Purchases=$1,950Gross Profit=Sales-COGS=43,500-$16,000=$27,500

c.

COGS=Sales-Gross Profit=46,000-$3,750=$42,250COGS=Beginning inventory+Purchases-Ending inventory$42,250=$7,500+Purchases-$9,000Purchases=$42,250-$7,500+$9,000=$43,750

d.

COGS=Beginning inventory+Purchases-Ending inventory=$8,000+$32,000-$6,600=$33,400Gross Profit=Sales-COGSSales=Gross Profit+Sales=$45,600+$33,400=$80,000

e.

COGS=Beginning inventory+Purchases-Ending inventory$7,000=$4,560+$6,600-Ending inventoryEnding inventory=$11,160-$7,000Ending inventory=$4,160Gross Profit=Sales-COGS=25,600-$7,000=$18,600Net Income=Gross Profit-Expenses=$18,600-$6,000=$12,600

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Chapter 5 Solutions

Loose Leaf for Fundamental Accounting Principles

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