Sales 5,250,000 Less: Sales Returns and Allowances 250,000 Net Sales 5,000,000 Cost of Goods Sold Inventory, December 31, 2019 750,000 Add: Purchases 2,750,000 Total Goods Available for Sale 3,500,000 Less: Inventory, December 31, 2020 500,000 Cost of Goods Sold 3,000,000 Gross Margin on Sales 2,000,000 Less: Selling and Administrative Expenses Selling expenses 400,000 Administrative expenses 600,000 Total selling and administrative expenses 1,000,000 Net operating income 1,000,000 Less: Interest Expense 250,000 Net income before tax 750,000 Less: Provision for Income tax, 32% 240,000 NET INCOME 510,000

Sales 5,250,000 Less: Sales Returns and Allowances 250,000 Net Sales 5,000,000 Cost of Goods Sold Inventory, December 31, 2019 750,000 Add: Purchases 2,750,000 Total Goods Available for Sale 3,500,000 Less: Inventory, December 31, 2020 500,000 Cost of Goods Sold 3,000,000 Gross Margin on Sales 2,000,000 Less: Selling and Administrative Expenses Selling expenses 400,000 Administrative expenses 600,000 Total selling and administrative expenses 1,000,000 Net operating income 1,000,000 Less: Interest Expense 250,000 Net income before tax 750,000 Less: Provision for Income tax, 32% 240,000 NET INCOME 510,000

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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