Question

Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000 Required: 1. Prepare a traditional income statement.

Answer 1

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

Answer 2

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

Learn more:

1. Learn more about income and expenses brainly.com/question/1890422  
2. Learn more about net income  brainly.com/question/10955397
3. Learn more about interest value  brainly.com/question/5993991

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.