Question

Wisconsin Company uses the periodic inventory system. Sales for 2016 were $1,880,000 while operating expenses were $700,000. Beginning and ending inventories for 2016 were $280,000 and $240,000, respectively. Net purchases were $720,000 while freight in was $60,000. The net income or loss for 2016 was:__________.
a) $120,000 net income
b) $ 40,000 net income
c) $360,000 net income
d) $120,000 net loss

Answer 1

Answer: $360,000

Explanation:

To solve the question, we needed to calculate the cost of goods sold first. This will be:

= Beginning Inventory + Purchases - Ending Inventory

= $280,000 + ($720,000 - $60,000) + $240,000

= $280,000 + $780,000 + $240,000

= $820,000

The net income or net loss will then be:

Sales = $1,880,000

Less: Cost of goods sold = $820,000

Gross profit = $1,060,000

Less: Operating expenses = $700,000

Net income = $360,000

The net income is $360,000