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

Exercise 3

Prepare Statements for a Merchandising Company

The cost accountant for Sun&Surf Apparel Shop has compiled the following information for last year's operations:

Administrative costs	$ 146 400
Merchandise inventory, January 1	26,000
Merchandise inventory, December 31	25,000
Merchandise purchases	1,220,000
Sales commissions	85,700
Sales revenue	1 868 000
Store rent	28 800
Store utilities	5,460
Transportation-in costs	9,240

Required

Prepare an income statement 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.

Income statement

S & S Apparel Shop

Sales revenue		$1,868,000
Less: Cost of goods sold		$1,230,240
Gross Margin		$637,760
Less: Expenses
Administrative expenses	$146,400
Store rent	$28,800
Store Utilities	$5,460
Sales commissions	$85,700	$266,360
Operating Profit		$371,400