Question

The following information was drawn from the Year 1 accounting records of Ozark Merchandisers:
a. Inventory that had cost $17,400 was sold for $31,320 under terms 2/20, net/30.
b. Customers returned merchandise to Ozark five days after the purchase.
c. The merchandise had been sold for a price of $784.
d. The merchandise had cost Ozark $560.
e. All customers paid their accounts within the discount period.
f. Selling and administrative expenses amounted to $3,132.
g. Interest expense paid amounted to $240.
h. Land that had cost $6,400 was sold for $8,640 cash.
Required:
1. Determine the amount of net sales.
2. Prepare a multistep income statement.

Answer 1

Answer and Explanation:

1. The computation of net sales is shown below:-

Net sales = Gross Sales - Sales Returns - Sales Discounts

= $31,320 - $784 - ($31,320 - $784) × 2%)

= $31,320 - $784 - $610.72

= $29,925.28

2. The preparation of multistep income statement is shown below:-

Income Statement

Net sales revenue                $29,925.28

Cost of Goods Sold              $16,840

($17,400 - $560)

Gross Profit                           $13,085.28

Selling and Administrative

Expenses                              $3,132

Income from Operations      $9,953.28

Other Income / Expense

Gain on sale of land  $2,240

($8,640 - $6,400)

Interest Expense      $240       $2,000

Net income                              $11,953.28