ACC 111
QUIZ
INCOME STATEMENT PREPARATION
Accounts selected from the Dec. 31, 2019 trial balance of the Victoriano Navarette Traders are
listed below:
Sales
9,630,000
Purchases
4,720,000
Merchandise Inventory, 1/1/19
2,170,000
Merchandise Inventory, 12/31/19
1,430,000
Salaries Expense-selling
1,140,000
Salaries Expense-general
920,000
Office supplies expense
460,000
Depreciation-office equipment
320,000
Sales returns and allowances
280,000
Insurance Expense
55,000
Sales Discounts
210,000
Transportation Out
170,000
Depreciation Expense-Store Equipment
160,000
Purchase returns and allowances
110,000
Selling Supplies expense
80,000
Purchase discounts
70,000
Transportation In
50,000
Miscellaneous expense
30,000
Required:
Prepare income statement.
Notes to Financial Statements
Note 1: Net Sales
Gross Sales
9,630,000
Less: Sales Ret.
280,000
Sales disc.
210,000
Net Sales
9,140,000
Note 2: Cost of sales
Merchandise Inventory beginning
Add: Net cost of purchases
Purchases
4,720,000
Less: PRA
(110,000)
2 points
2,170,000
PD
(70,000)
Add: Freight in
50,000
Cost of goods available for sale
Less: Merchandise end
Cost of Sales
Note 3: Selling and distribution cost
Transportation out
Depreciation store equipment
Salaries expense – selling
Selling supplies expense
Total
4,590,000
6,760,000
(1,430,000)
5,330,000
170,000
160,000
1,140,000
80,000
1,550,000
Note 4: General and administrative expenses
Salaries expense
920,000
Office supplies expense
460,000
Depreciation office equipment
320,000
Insurance expense
55,000
Miscellaneous expense
30,000
Total
1,785,000
2 points
2 points
2 points
Victoriano Navarette Traders
Income Statement
For the year ended Dec. 31, 2019
Net Sales
Less: Cost of Sales
Gross Profit
Less; Operating Expenses
Selling and distribution expense
1,550,000
General and administrative expense 1,785,000
Net Income
9,140,000 1pt
(5,330,000) 1pt
3,810,000 1 pt
3,335,000
475,000
=======
Closing Entries:
1. Sales
9,630,000
Purchases ret. And allow
110,000
Purchase discounts
70,000
Income summary
9,810,000
To close IS accounts with credit balance.
1 pt
1pt
1pt
2. Merchandise inventory, end
1,430,000
Income summary
1,430,000
To establish ending inventory.
3. Income summary
10,765,000
Merchandise inventory beg.
2,170,000
Purchases
4,720,000
Sales returns and allow.
280,000
Sales discounts
210,000
Transportation in
50,000
Insurance expense
55,000
Transportation out
170,000
Depreciation store equipment
160,000
Salaries expense – selling
1,140,000
Selling supplies expense
80,000
Salaries expense
920,000
Office supplies expense
460,000
Depreciation office equipment
320,000
Miscellaneous expense
30,000
To close IS accounts with debit balances.
4. Income summary
475,000
Victoriano, Capital
475,000
To close income summary with net income result.