Chapter 18, Problem 9E

Requirement 1

To determine

To prepare:

Income statement for −

Garcon Company

Pepper Company

Answer to Problem 9E

Solution:

Income statement for Garcon Company −

Garcon Company
Income Statement
For the Year Ended December 31, 2015
Sales		195,030
Less: Cost of Goods sold		91,030
Gross profit		104,000
Less: Selling and Administrative Expenses
General and administrative expenses	21,000
Selling expenses	50,000
Total selling and administrative expenses		71,000
Operating Income		33,000

Explanation of Solution

Explanation The income statement for Garcon Company has been prepared using the information given.

Sales = $ 195,030

Gross profit

The information given to calculated gross profit is −

Sales = $ 195,030

Cost of Goods sold = $ 91,030

  $\begin{array}{l}Grossprofit=Sales–CostofGoodsSold\hfill \\ Grossprofit=\$195,030-\$91,030\hfill \\ Grossprofit=\$104,000\hfill \end{array}$

Total selling expenses −

The information given to calculate total selling and administrative expenses is −

General and administrative expenses = $ 21,000

Selling expenses = $ 50,000

  $\begin{array}{l}Totalsellingandadministrativeexpenses=Generalandadministrativeexpenses+Sellingexpenses\hfill \\ Totalsellingandadministrativeexpenses=\$21,000+\$50,000\hfill \\ Totalsellingandadministrativeexpenses=\$71,000\hfill \end{array}$

Operating Income −

The information given to calculate operating income is −

Gross profit = $ 104,000

Total selling and administrative expenses = $ 71,000

  $\begin{array}{l}OperatingIncome=Grossprofit-Totalsellingandadministrativeexpenses\hfill \\ OperatingIncome=\$104,000-\$71,000\hfill \\ OperatingIncome=\$33,000\hfill \end{array}$

The income statement of Garcon Company has been prepared.

Income statement for Pepper Company −

Pepper Company
Income Statement
For the Year Ended December 31, 2015
Sales		290,010
Less: Cost of Goods sold		143,010
Gross profit		147,000
Less: Selling and Administrative Expenses
General and administrative expenses	43,000
Selling expenses	46,000
Total selling and administrative expenses		89,000
Operating Income		58,000

Explanation:

The income statement for Garcon Company has been prepared using the information given.

Sales = $ 290,010

Gross profit

The information given to calculated gross profit is −

Sales = $ 290,010

Cost of Goods sold = $ 143,010

  $\begin{array}{l}Grossprofit=Sales–CostofGoodsSold\hfill \\ Grossprofit=\$\text{ 290,010 }-\$\text{ 143,010}\hfill \\ Grossprofit=\$147,000\hfill \end{array}$

Total selling expenses −

The information given to calculate total selling and administrative expenses is −

General and administrative expenses = $ 43,000

Selling expenses = $ 46,000

  $\begin{array}{l}Totalsellingandadministrativeexpenses=Generalandadministrativeexpenses+Sellingexpenses\hfill \\ Totalsellingandadministrativeexpenses=\$\text{ 43},000+\$\text{ 46},000\hfill \\ Totalsellingandadministrativeexpenses=\$\text{ 89},000\hfill \end{array}$

Operating Income −

The information given to calculate operating income is −

Gross profit = $ 147,000

Total selling and administrative expenses = $ 899,000

  $\begin{array}{l}OperatingIncome=Grossprofit-Totalsellingandadministrativeexpenses\hfill \\ OperatingIncome=\$147,000-\$\text{ 89},000\hfill \\ OperatingIncome=\$\text{ 58},000\hfill \end{array}$

The income statement of Pepper Company has been prepared.

Conclusion

Thus, the income statements for Garcon Company and Pepper Company have been prepared.

Requirement 2

To determine

To prepare:

Current assets section for −

Garcon Company

Pepper Company

Answer to Problem 9E

Solution:

The current asset section for Garcon Company −

Garcon Company
Balance sheet
For the Year Ended December 31, 2015
Current Assets
Cash		20,000
Accounts Receivables, net		13,200
Inventory
Raw material − Ending	5,300
Work in process − Ending	22,000
Finished gods − Ending	17,650
		44,950
Total current assets		78,150

Explanation of Solution

The current assets section includes all the current assets of the company. The current assets given in the information are −

Cash = $ 20,000

Accounts Receivables, net = $ 13,200

Raw material − Ending = $ 5,300

Work in process − Ending = $ 22,000

Finished gods − Ending = $ 17,650

Using the above information, the current assets section for Garcon Company has been prepared.

The current asset section for Pepper Company −

Pepper Company
Balance sheet
For the Year Ended December 31, 2015
Current Assets
Cash		15,700
Accounts Receivables, net		19,450
Inventory
Raw material − Ending	7,200
Work in process − Ending	16,000
Finished gods − Ending	13,300
		36,500
Total current assets		71,650

Explanation:

The current assets section includes all the current assets of the company. The current assets given in the information are −

Cash = $ 15,700

Accounts Receivables, net = $ 19,450

Raw material − Ending = $ 7,200

Work in process − Ending = $ 16,000

Finished gods − Ending = $ 13,300

Using the above information, the current assets section for Pepper Company has been prepared.

Conclusion

Thus, the current assets section for both the companies have been prepared.