Question

1.Inventory that had cost $24,600 was sold for $36,900 under terms 2/20, net/30.

2.Customers returned merchandise to Ozark five days after the purchase. The merchandise had been sold for a price of $1,612. The merchandise had cost Ozark $1,040.
3.All customers paid their accounts within the discount period.
4.Selling and administrative expenses amounted to $3,690.
5.Interest expense paid amounted to $370.
6.Land that had cost $7,600 was sold for $9,500 cash.
A. Determine the amount of sales
B. Prepare a multistep income statement
C.Where would the interest expense be shown on the statement of cash flows?
1. Operating Activities
2. Investing Activities
3. Financing Activities
D. How would the sale of the land be shwon on the statement of cash flows?
1.The full sales price of the land, $9,500, would be shown as a cash inflow from financing activities on the statement of cash flow
2.The full sales price of the land, $9,500, would be shown as a cash inflow from investing activities on the statement of cash flows.
3.The full sales price of the land, $9,500, would be shown as a cash inflow from operating activities on the statement of cash flows1

Answer 1

The amount of sales is $35,288 after accounting for returns. The interest expense is typically included in Operating Activities on the statement of cash flows. The sale of the land would appear as a cash inflow from Investing Activities for the full amount of $9,500.

Step-by-step explanation:

To answer the questions presented, we will need to perform calculations based on the given data. First, let's determine the amount of sales:

• Initial sales were $36,900
• Returns were $1,612
• Total sales are therefore $36,900 - $1,612 = $35,288

Next, we will prepare a multistep income statement:

1. Gross Profit is calculated as Sales minus the Cost of Goods Sold (COGS). COGS for the items sold is $24,600 - $1,040 (cost of returned goods) = $23,560. So, Gross Profit = $35,288 - $23,560 = $11,728.
2. Operating Income is Gross Profit minus Operating Expenses which include Selling and Administrative Expenses. Operating Income = $11,728 - $3,690 = $8,038.
3. Net Income before taxes is Operating Income minus Interest Expense which is $8,038 - $370 = $7,668.

Interest expense would generally be shown in the Operating Activities section of the statement of cash flows.

As for the sale of the land, it would be shown as a cash inflow from investing activities on the statement of cash flows. Therefore, the full sales price of the land, $9,500, would be recorded under Investing Activities.