Respuesta :
In order to find Net Income as per traditional income statement, we will first require to calculate cost of goods sold as below:
Beginning Merchandise Inventory................................................24000
Add: Purchases..................................................................................180000
Less: Ending Merchandise Inventory...........................................(44000)
Cost of Goods Sold............................................................................160000
Traditional Income Statement
Sales................................................................................................................600000
Less: Cost of Goods Sold..........................................................................(160000)
Gross Profit....................................................................................................440000
Less: Selling and Administrative Expenses
Variable Selling Expense.........................................................80000
Variable Admin Expense............................................................40000
Fixed Selling Expense.................................................................40000
Fixed Admin Expense...................................................................30000
Total .......................................................................................................................(190000)
Net Income.............................................................................................................250000
Refer to Table 2 for the traditional income statement.
Further Explanation:
Traditional income statement:
The traditional income statement tells us about the net income of the company. It is prepared to get the information about the net income is earned in a particular period.
Given information for preparing the traditional income statement:
- Beginning merchandise inventory is $24,000
- Ending merchandise inventory is $180,000
- Merchandise purchase is $44,000
- Number of units sold is 20,000
- Selling price per unit is $30
- Variable selling expense per unit is $4
- Variable administrative expense per unit is $2
- Total fixed selling expense is $40,000
- The total fixed administrative expense is $30,000.
Compute the cost of goods sold :
Compute the cost of goods sold by adding the beginning merchandise inventory and the merchandise purchase and subtracting the ending merchandise inventory. Refer to Table 1 for the computation of cost of goods sold refers to table 1.
Working note 1:
Compute the sales amount by multiplying the number of units sold with the selling price of the units.
Sales amount = Number of units sold × Selling price
= 20,000 × $30
= $600,000
Working note 2:
Compute the Variable selling expense by multiplying the number of units sold with the Variable selling expense per unit.
Variable selling expense amount = Number of units sold × Variable selling expense per unit. = 20,000 × $4
= $80,000
Working note 3:
Compute the Variable administrative expense amount by multiplying the number of units sold with the Variable administrative expense per unit.
Variable administrative expense amount = Number of units sold × Variable administrative expense per unit
= 20,000 × $2
= $40,000
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Answer details:
Grade: Middle School
Subject: Accounting
Chapter: Income statement
Keywords: Cherokee inc., merchandiser, provided, number of units sold, selling price, administrative expense, merchandise inventory, traditional income statement.
