Question

The cost accountant for Angie’s Apparel has compiled the following information for last month's operations. Administrative costs $ 72,000 Merchandise inventory, July 1 28,000 Merchandise inventory, July 31 25,000 Merchandise purchases 630,000 Sales commissions 43,500 Sales revenue 944,000 Store rent 13,900 Store utilities 3,100 Transportation-in costs 5,300 Required: 1. Prepare a cost of goods sold statement. 2. Prepare an income statement.

Answer 1

Answer:

Given that,

Administrative costs = $72,000

Merchandise inventory, July 1 = 28,000

Merchandise inventory, July 31 = 25,000

Merchandise purchases = 630,000

Sales commissions = 43,500

Sales revenue = 944,000

Store rent = 13,900

Store utilities = 3,100

Transportation-in costs = 5,300

1. Cost of goods sold statement:

For the Month Ended July 31,

Total cost of goods purchased = Merchandise purchases + Transportation-in

                                                    = 630,000 + 5,300

                                                    = $635,300

Cost of goods available for sale = Merchandise inventory, July 1  + Total cost of goods purchased

                                                      = 28,000 + $635,300

                                                      = $663,300

Cost of goods sold = Cost of goods available for sale - Merchandise inventory, July 31

                                = $663,300 - $25,000

                                = $638,300

2.  Income statement:

For the Month Ended July 31,

Gross margin = Sales revenue - Cost of goods sold

                      = 944,000 - $638,300

                      = $305,700

Marketing and administrative costs = Administrative costs + Sales commissions + Store rent + Store utilities

                                                          = $72,000 + $43,500 + $13,900 + $3,100

                                                          = $132,500

Operating profit = Gross margin - Marketing and administrative costs

                           =  $305,700 - $132,500

                           = $173,200