Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 4

Prepare Statements for a Merchandising Company

Powell Street Electronics has provided the following information for February:

Sales revenue	$ 807,000
Store rent	43,600
Store utilities	27,100
Administrative costs	57,750
Sales commissions	128,300
Merchandise purchases	545,500
Transportation-in costs	21,200
Merchandise inventory, February 1	37,100
Merchandise inventory, February 28	41,800

Required

Prepare an income statement for February with a supporting cost of goods sold statement.

Step 1 of 3

The income statement of a company shows the sales revenue, cost of goods sold, along with marketing and administrative costs. The final outcome of the income statement is the operating profit/ (loss).

Sales revenue		$807,000
Less: Cost of goods sold		$562,000
Gross Margin		$245,000
Less: Expenses
Administrative expenses	$57,750
Store rent	$43,600
Store Utilities	$27,100
Sales commissions	$128,300	$256,750
Operating Loss		($11,750)