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
