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

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 6E: Goods in Transit Gravais Company made two purchases on December 29, 2019. One purchase for 3,000 was...

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Goods in Transit Gravais Company made two purchases on December 29, 2019. One purchase for 3,000 was shipped FOB destination, and the second for 4,000 was shipped FOB shipping point. Neither purchase had been received nor paid for on December 31, 2019. Required: Which of these purchases, if either, does Gravais include in inventory on December 31, 2019? What is the cost?
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