Question

Merchandise accounts and computations LO C2. Kleiner Merchandising Company Accumulated depreciation $700 Beginning inventory 11,000 Ending Inventory 6,600Expenses 2,050 Net Purchases 13,500Net Sales 21,500 Krug Service Company Expenses $9,700 Revenues 26,000 Cash 900Prepaid rent 880 Accounts pavable 200 Equipment 2,500Required:A. Compute gross profit, the goods available for sale, and the cost of goods sold for the merchandiser. B. Use the above information from a service company and from a merchandiser to compute net income, Goods available for sale, Cost of goods sold, Gross profit a. b. Net income for Krug Service Company, Net income for Kleiner Merchandising Company.

Answer 1

Answer:

(A) Kleiner Merchandising Company:

Goods available for sale = $24,500

Cost of goods sold = $17,900

Gross profit = $3,600

Net income = $1,550

(B) Krug Service Company:

Net income = $16,300

Explanation:

(A) Kleiner Merchandising Company:

Goods available for sale:

= Beginning inventory + Net purchases

= $11,000 + $13,500

= $24,500

Cost of goods sold:

= Goods available for sale - Ending inventory

= $24,500 - $6,600

= $17,900

Gross profit = Net sales - Cost of goods sold

                    = $21,500 - $17,900

                    = $3,600

(b) Kleiner Merchandising Company:

Gross profit = $3,600

Net income = Gross profit - Expenses

                   = $3,600 - 2,050

                   = $1,550

Krug Service Company:

Net income = Revenues - Expenses

                   = $26,000 - $9,700

                   = $16,300