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Serjik [45]
3 years ago
14

Garnett Co. shipped inventory on consignment to Hart Co. that originally cost $50,000. Hart paid $1,200 for advertising that was

reimbursable from Garnett. At the end of the year, 40% of the inventory was sold for $32,000. The agreement stated that a commission of 10% will be provided to Hart for all sales. What amount should Garnett report as net income for the year?
Business
1 answer:
Yuki888 [10]3 years ago
8 0

Answer:

The answer is: Garnett Co.'s net income is $7,600

Explanation:

To determine the net income we must first calculate the cost of goods sold and the commissions paid:

  • COGS = $50,000 x 40% = $20,000
  • Commissions = $32,000 x 10% = $3,200

Now we can elaborate the following income statement for Garnett Co.

Total sales                     $32,000

COGS                             ($20,000)

Commissions                 ($3,200)

<u>Advertising expense     ($1,200)    </u>

Net income                    $7,600

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