Question

Alpha Company provided the following data concerning its income statement: sales, $850,000; purchases, $368,000; beginning inventory, $255,000; ending inventory, $282,000; operating expenses, $105,000; freight-in, $5,000; sales discounts, $17,000; purchases discounts, $15,000; sales returns & allowances, $107,000; and purchases returns & allowances, $41,000. The data are complete and provide the basis for preparation of an income statement. How much is net income?

Answer 1

Answer:

NET INCOME: 341,000

Explanation:

Inventory equation:

beginning inventory + purchase = COGS  + ending inventory

base on your information we need to get the net purchases and COGS so:

purchases                  368,000

freight-in                         5,000

return and allowance  -41,000

purchase discount      -15,000

net purchases            307,000

Now we replace in the inventory equation with the know values

255,000 + 307,000 = COGS + 282,000

and we solve for COGS

COGS = 280,000

Now we have to determinate the net sales:

sales                850,000

sales discount   -17,000

return&llowances -107,000

net sales         726,000

Finally we proceed with the net income statment

net sales                  726,000

COGS                         -280,000

Gross Profit                  446,000

operating expenses  -105,000

Net Income                   341,000