Answer and Explanation:
1. The computation is shown below:
(a) For the cost of goods purchased 
Purchases                                      $260,000
Add: Merchandise freight-in        $10,000
Less: Purchase returns 
and allowances                       $(11,000)
Purchase discounts               $(9,000)
Cost of goods purchased         $250,000
(b) For the cost of goods sold 
Merchandise inventory, January 1, 2011     $45,000
Add: Cost of goods purchased             $250,000
Goods available for sale                     $2,95,000
Less: Merchandise inventory, 
December 31, 2011	$                                  ($52,000)
Cost of goods sold                               $243,000
2. Now the preparation of the income statement is presented below:
<u>Marvin department store
</u>
<u>Income statement
</u>
<u>year ended December 31, 2017
</u>
<u>(In thousands)
</u>
Revenues                                           $320,000
Less: 
Cost of good sold (see above)         ($243,000)
Gross Margin                                       $77,000        
Less: 
Operating costs:  
Marketing and advertising cost         ($24,000)
Shipping of merchandise to customers (2,000)
Building depreciation                              ($4,200)
General and administrative costs          ($32,000)
Total operating cost                              ($62,200)
Operating income                                 $14,800