Answer:
a. Record the above transactions in a financial statements model. The first event is recorded as an example.
- I prepared an excel spreadsheet because there is not enough room here.
b. Determine the amount of net sales.
c. Prepare a multistep income statement. Include common size percentages on the income statement.
Multistep Income Statement
Revenues: $69,201
- Sales revenue $72,000
- Sales discounts ($699)
- Sales returns and allowances ($2,100)
<u>COGS: ($40,650)</u>
Gross profit: $28,551
S&A expenses: ($8,500)
- Delivery ($1,650)
- <u>Sales and adm. expenses ($6,850) </u>
Operating income $20,051
d. The return-on-sales ratio for Junker’s Stash during the prior year was 12 percent. Based on the common size data in the income statement, did the expenses for Junker’s Stash increase or decrease in Year 2?
return on sales = operating profit / net sales = $20,051 / $69,201 = 28.98%
this means that Junker's expenses decreased this year
Explanation:
1)
Dr Merchandise inventory 70,000
Cr Cash 70,000
3)
Dr Accounts receivable 72,000
Cr Sales revenue 72,000
Dr Cost of goods sold 41,900
Cr Merchandise inventory 41,900
4)
Dr Sales returns and allowances 2,100
Cr Accounts receivable 2,100
Dr Merchandise inventory 1,250
Cr Cost of goods sold 1,250
5)
Dr Delivery expense 1,650
Cr Cash 1,650
6)
Dr Cash 69,201
Dr Sales discounts 699
Cr Accounts receivable 69,900
7)
Dr S&A expenses 6,850
Cr Cash 6,850
8)
Dr Cash 9,100
Cr land 9,100
