| Prepare the financial statements and understand their relationships for service organizations. |
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Illustrate accounting for merchandising operations, inventory control systems and prepare financial reports for merchandising organizations. recognize and value accounts receivables. |
Multi step format:
Income Statement
Company Name
For the Time Period Ending Date
Net sales
– Cost of goods sold
Gross profit
– Operating expenses
Operating profit
– Interest expense
Profit before taxes
– Taxes
Net income
Net sales = Gross sales – (Returns and Allowances)
Cost of goods sold = Beginning inventory + Materials purchases – Ending inventory
In 2020, a hardware retail company-Home hardware sold 1,500 units of its product at an average price of 400 per unit.
The company reported estimated Returns and allowances in 2020 of 200,000. Home hardware purchased 11,000 units of its product from its manufacturer at an average cost of 300 per unit. Home hardware began with 900 units of its product in inventory (carried at an average cost of 300 per unit). Operating expenses for Home hardware, Inc. in 2020 were 400,000. Home hardware had 2,000,000 loan from local bank. This loan carried an average interest rate of 10 percent. Finally, Home hardware’s tax rate was 40 percent. Home hardware’s fiscal year runs from January 1 through December 31.
1. Given this information, construct Home hardware’s 2020 multi-step income statement.
2. What was Home hardware’s 2020 ending inventory balance?
