Exercise 2: Income Statement – Merchandising Business: Required

Exercise 2: INCOME STATEMENT – MERCHANDISING BUSINESS

Problem 1 The following information pertains to Valdez Company: Transportation In Merchandise Inventory, 1/1/20 Merchandise Inventory, 12/31/20 Purchases Purchases Returns and Allowances Purchase Discounts

172,000 1,200,000 1,900,000 4,300,000 129,000 215,000

Required: Compute the cost of sales for December 31, 2020.

Problem 2 The partial income statements of five different companies are as follows: Net Sales Merchandise Inventory, 1/1/20 Net Cost of Purchases Goods Available for Sale Merchandise Inventory, 1/31/20 Cost of Sales Gross Profit

1 a

2 d

b 50,000 80,000 e 110,000 160,000 40,000 f c 140,000 50,000

40,000

3 4 5 250,00 290,000 400,000 0 70,000 j 120,000 g 160,000 390,000 h k m 30,000 70,000 n 230,00 l 380,000 0 i 160,000 o

Required: Replace the letter blanks with appropriate amounts.

Problem 3 Charito Retailers has the following accounts as of December 31, 2019: Merchandise Inventory Sales Sales Returns and Allowances

80,000 190,000 20,000

Purchases 60,000 Purchase Discounts 3,000 Transportation In 1,000 Merchandise inventory based on physical count on December 31 is P74,000. Required: Prepare a partial income statement.

Problem 4 Accounts selected from the December 31, 2019 trial balance of Victoriano Company are listed below: Sales Purchases Merchandise Inventory, 1/1/19 Merchandise Inventory, 12/31/19 Salaries Expense - Selling Salaries Expense - General Office Supplies Expense Depreciation Expense – Office Equipment Sales Returns and Allowances Insurance Expense Sales Discounts Transportation Out Depreciation Expense – Store Equipment Purchase Returns and Allowances Selling Supplies Expense Purchase Discounts Transportation In Miscellaneous Expenses

9,630,000 4,720,000 2,170,000 1,430,000 1,140,000 920,000 460,000 320,000 280,000 55,000 210,000 170,000 160,000 110,000 80,000 70,000 50,000 30,000

Required: Prepare the income statement using function of expense method. Hint: operating expenses are divided into 1. General and Administrative Expenses; 2. Selling and Marketing Expenses.