Question

On January 1, 2017, Brooke Hanson Corporation had inventory of $50,000. At December 31, 2017, Brooke Hanson had the following account balances.

Freight-in $ 4,000
Purchases 509,000
Purchase discounts 6,000
Purchase returns and allowances 2,000
Sales revenue 840,000
Sales discounts 5,000
Sales returns and allowances 10,000


At December 31, 2017, Brooke Hanson determines that its ending inventory is $60,000.

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Compute Brooke Hanson's 2017 gross profit.

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Compute Brooke Hansons 2017 operating expenses if net income is $130,000 and there are no nonoperating activities.

Answer 1

Answer:

Sales Revenue          825,000

Cost of goods sold    495,000

Gross profit                330,000

Operating expenses 200,000

Explanation:

Freight-in $ 4,000

Purchases 509,000

Purchase discounts (6,000)

Purchase returns and allowances (2,000)

Net purchases:  505,000

Beginning Inventory   50,000

Available for sale      555,000

Ending Inventory      (60,000)  

COGS                        495,000

Sales revenue                        840,000

Sales discounts                         (5,000)

Sales returns and allowances (10,000)

Net Sales                                825,000

Gross Profit: 825,000  -  495,000 = 330,000

Net Income : Gross profit - operating expenses + non-operating income

As non-operating income is stated to be zero then:

130,000 = 330,000 - operating expenses

op. expenses = 330,000 - 130,000 = 200,000