Valix Finacc vol 1 Problem 2-8

Financial Accounting Volume 1 2008 Valix-Peralta

Chapter 1 Problem 2-8

Youth Company

Income Statement

Year ended December 31, 2008

                                                                                    Note

Net sales revenue                                                          (1)                               8,870,000

Cost of goods sold                                                       (2)                             (5,900,000)

Gross income                                                                                                  2,970,000

Expenses:

    Selling expenses                                                         (3)            690,000

    Administrative expenses                                            (4)            580,000      

    Other expense                                                           (5)            340,000      1,610,000

Income before tax                                                                                          1,360,000

Income tax expense                                                                                      (   360,000)

Net income                                                                                                     1,000,000

                                                                                                           21

Note 1 – Net sales revenue

Sales                                                                                                                   9,070,000   

Sales returns and allowances                                                               (   200,000)

Net sales revenue                                                                                              8,870,000

Note 2 – Cost of goods sold

Beginning inventory                                                                                           1,500,000

Purchases                                                                                5,750,000

Transportation in                                                                        150,000

Purchase discounts                                                                (   100,000)            5,800,000

Goods available for sale                                                                                    7,300,000

Ending inventory                                                                                              (1,400,000)

Cost of goods sold                                                                                            5,900,000

Note 3 – Selling expenses

Depreciation – store equipment                                                                          110,000

Store supplies                                                                                                          80,000

Sales salaries                                                                                                        500,000

Total                                                                                                                     690,000

Note 4 – Administrative expenses        

Officers’ salaries                                                                                                    400,000

Depreciation – building                                                                                       120,000

Office supplies                                                                                            60,000

Total                                                                                                                     580,000

Note 5 – Other expense

Uninsured flood loss                                                                                              340,000