Question

The following information was drawn from the Year 1 accounting records of Ozark Merchandisers:

Inventory that had cost $21,200 was sold for $39,900 under terms 2/20, net/30.
Customers returned merchandise to Ozark five days after the purchase. The merchandise had been sold for a price of $1,520. The merchandise had cost Ozark $920.
All customers paid their accounts within the discount period.
Selling and administrative expenses amounted to $4,200.
Interest expense paid amounted to $360.
Land that had cost $8,000 was sold for $9,250 cash.
Required
a. Determine the amount of net sales. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
b. Prepare a multistep income statement. (Round your intermediate calculations and final answer to the nearest whole dollar amount. Amounts to be deducted and losses should be indicated with a minus sign.)
c. Where would the interest expense be shown on the statement of cash flows?
i. Operating activities
ii. Investing activities
iii. Financing activities
d. How would the sale of the land be shown on the statement of cash flows?
i. The full sales price of the land, $9,250, would be shown as a cash inflow from financing activities on the statement of cash flows.
ii. The full sales price of the land, $9,250, would be shown as a cash inflow from investing activities on the statement of cash flows.
iii. The full sales price of the land, $9,250, would be shown as a cash inflow from operating activities on the statement of cash flows

Answer 1

Answer is explained in the explanation section below.

Step-by-step explanation:

Part a: Determination of net sales:

Gross Sales = $39,900

Less: Sales Return = $1520

Less: Sales Discount = ($39,900 -$1520) x 2% = 767.6

Net Sales = $37,612.3

Part b: Income Statement:

Net Sales = $37,612.3

Cost of Goods Sold ($21,200 - $920) = $20,280

Gross Margin ($37,612.3 - $20,280) = $17,332.3

Operating Expenses:

Selling and administrative expenses = $4200

Operating Income ($17,332.3 - $4200) = $ 13,132.3

Non-Operating Items:

Interest Expense = $360

Gain on Sale of Land ( $9250 - $8000) = $1250

Net Income ($13,132.3 + $1250 - $360) = $14022.3

part c:

The interest expense reported in the operating activities of the statement of cash flows when paid.

part d)

ii. The sale of the land be shown on the statement of the cash flow as the full sales price of the land, $9250, would be shown as a cash inflow investing activities on the statement of the cash flows.