Answered: Accounting Question

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Step 1

1. The organization utilizes a periodic inventory framework in light of the fact that the records the organization keeping up an incorporate purchase, purchase returns and remittances, purchase rebate yet not the expense of product sold.

2. The multiple-step income statement for Simkins Company is given below:

Simkin Company.
Income Statement
For the year ended June 30, 2019
Particulars	Amount($)	Amount($)	Amount($)
Revenues
Sales revenue			6,590,000

Cost of goods sold:
Opening inventory, July 31, 2018		415,000
Purchases	4,100,000
Less: Purchases returns and allowances	(32,000)
Less: Purchases discounts	(13,000)
Net purchases	4,055,000
Add: Freight inward	45,000
Cost of goods purchased		4,100,000
Cost of goods available for sale		4,515,000
Less: Closing inventory, June 30, 2019.		(508,000)
Cost of merchandise sold before estimated returns		4,007,000
Less: Increase in estimated returns inventory ($33,000 − $25,000)		(8,000)
Cost of goods sold			3,999,000
Gross profit			2,591,000
Operating expenses:
Selling expenses
Salaries expense – Sales	580,000
Advertising expense	315,000
Delivery expense	18,000
Depreciation expense - store equipment	12,000
Miscellaneous expenses - sales	28,000
Total selling expenses		953,000
Administrative expenses
Salaries expense - administrative	375,000
Rent expense	43,000
Insurance expense	17,000
Supplies expense	5,000
Depreciation expense - office equipment	4,000
Miscellaneous expenses - administrative	16,000
Total administrative expenses		460,000
Total operating expenses			1,413,000
Income from operations			1,178,000
Other income (Expense)
Rent revenue		32,500
Interest expense		(2,500)	30,000
Net income			1,208,000