Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
295) In April, Holderness Inc, a merchandising company, had sales of $221,000, selling expenses of $14,000, and administrative expenses of $25,000. The cost of merchandise purchased during the month was $155,000. The beginning balance in the merchandise inventory account was $34,000 and the ending balance was $48,000.
Required:
Prepare a traditional format income statement for April.
Answer:
Traditional Format Income Statement
Sales
$221,000
Cost of goods sold*
141,000
Gross margin
80,000
Selling and administrative expenses:
Selling expenses
$14,000
Administrative expenses
25,000
39,000
Net operating income
$41,000
*Cost of goods sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory
Cost of goods sold = $34,000 + $155,000 — $48,000 = $141,000
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
296) Fanelli Corporation, a merchandising company, reported the following results for July:
Number of units sold
5,300
Selling price per unit
$590
Unit cost of goods sold
$403
Variable selling expense per unit
$58
Total fixed selling expense
$124,400
Variable administrative expense per unit
$22
Total fixed administrative expense
$206,300
Cost of goods sold is a variable cost in this company.
Required:
a. Prepare a traditional format income statement for July.
b. Prepare a contribution format income statement for July.
Answer:
a. Traditional Format Income Statement
Sales (5,300 units × $590 per unit)
$3,127,000
Cost of goods sold (5,300 units × $403 per unit)
2,135,900
Gross margin
991,100
Selling and administrative expenses:
Selling expense ((5,300 units × $58 per unit) + $124,400)
$431,800
Administrative expense ((5,300 units × $22 per unit) + $206,300)
322,900
754,700
Net operating income
$236,400
b. Contribution Format Income Statement
Sales (5,300 units × $590 per unit)
$3,127,000
Variable expenses:
Cost of goods sold (5,300 units × $403 per unit)
$2,135,900
Variable selling expense (5,300 units × $58 per unit)
307,400
Variable administrative expense (5,300 units × $22 per unit)
116,600
2,559,900
Contribution margin
567,100
Fixed expenses:
Fixed selling expense
124,400
Fixed administrative expense
206,300
330,700
Net operating income
$236,400
Difficulty: 2 Medium
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
297) Weingartner Corporation, a merchandising company, reported sales of 4,800 units for July at a selling price of $269 per unit. The cost of goods sold (all variable) was $114 per unit and the variable selling expense was $6 per unit. The total fixed selling expense was $38,100. The variable administrative expense was $14 per unit and the total fixed administrative expense was $59,900.
Required:
a. Prepare a contribution format income statement for July.
b. Prepare a traditional format income statement for July.
Answer: a. Contribution Format Income Statement