Explanation Given Information: For the Miss Muffins’ Bakery of July 31 2015: Gross sales is $32596, returns and allowance is $296, cost of beginning inventory is $16872, cost of purchase is $33596, cost of ending inventory $21843, total operating expenses $1894. For the Miss Muffins’ Bakery of July 31 2016: Gross sales is $35403, returns and allowance is $342, cost of beginning inventory is $17403, cost of purchase is $27983, cost of ending inventory $22583, total operating expenses $3053. Formula used: Prepare an income statement using the following steps, 1. Find and record net sales. a. Record total sales. b. Record sales returns and allowances. c. Subtract sales returns and allowances from gross sales. Net sales = Total sales − Sales returns and allowances 2. Find and record cost of goods sold. a. Record cost of beginning inventory. b. Record cost of purchases. c. Record cost of ending inventory. d. Add cost of beginning inventory and cost of purchase and subtract cost of ending inventory. Cost of goods sold = Cost of beginning inventory + Cost of purchases − Cost of ending inventory 3. Find and record gross profit. Gross profit = Net sales − Cost of goods sold 4. Find and record net income Net income = Gross profit − Operating expenses 5. Create an additional column labeled percent of net sales: For each item divide the amount of the item by the net sales and record the result as a percent. Percent of net sales = amount of item net sales × 100 % Calculation: Consider the Miss Muffins’ Bakery of July 31 2015, Gross sales are $32596. Returns and allowance is $296. Cost of beginning inventory is $16872. Cost of purchase is $33596. Cost of ending inventory $21843. Total operating expenses $1894. Therefore, the net sales, cost of goods sold, gross profit and net income can be computed in the following way, Net sales = $ 32596 − $ 296 = $ 32300 And, Cost of goods sold = $ 16872 + $ 33596 − $ 21843 = $ 28625 And, Gross profit = $ 32300 − $ 28625 = $ 3675 Now, Net income = $ 3675 − $ 1894 = $ 1781 Therefore, the net sales, cost of goods sold, gross profit and net income for Miss Muffins’ Bakery of July 31 2015 is $32300, $28625, $3675 and $1781 respectively. Calculate the percent of net sales for each category in the year 2015, Therefore, the total sales is, Total sales : 32596 32300 × 100 % = 100.9 % The sales return and allowances is, Sales returns and allowances = 296 32300 × 100 % = 0.9 % The net sales is, Net sales = 32300 32300 × 100 % = 100 % The cost of beginning inventory is, Cost of beginning inventory = 16872 32300 × 100 % = 52.2 % The cost off purchase is, Cost of purchases = 33596 32300 × 100 % = 104.0 % The cost of ending inventory is, Cost of ending inventory = 21843 32300 × 100 % = 67.6 % The cost of goods sold is, Cost of goods sold = 28625 32300 × 100 % = 88.6 % The gross profit is, Gross profit = 3675 32300 × 100 % = 11.4 % The total operation expenses is, Total Operation expenses = 1894 32300 × 100 % = 5.9 % The net income is, Net income = 1781 32300 × 100 % = 5.5 % Consider the Miss Muffins’ Bakery of July 31 2016, Gross sales are $35403

Portfolio of Accounting Systems for Small and Medium-Sized Businesses.

11th Edition

ISBN: 9780136857761

Author: National Society of Public Accountants Staff

Publisher: Prentice Hall

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Chapter 21.2, Problem 5SE

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Portfolio of Accounting Systems for Small and Medium-Sized Businesses.

Ch. 21.1 - Prob. 1-1SC Ch. 21.1 - Prob. 1-2SC Ch. 21.1 - Prob. 1-3SC Ch. 21.1 - Prob. 1-4SC Ch. 21.1 - Prob. 2-1SC Ch. 21.1 - Prob. 2-2SC Ch. 21.1 - Prob. 2-3SC Ch. 21.1 - Prob. 2-4SC Ch. 21.1 - Prob. 3-1SC Ch. 21.1 - Prob. 3-2SC

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A vertical analysis for the income statement of Miss Muffins’ Bakery of July 31 2015, 2016.

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