Question

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

1. Inventory that had cost $15,600 was sold for $23,400 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 $550. The merchandise had cost Ozark $440.
3. All customers paid their accounts within the discount period.
4. Selling and administrative expenses amounted to $2,340.
5. Interest expense paid amounted to $210.
6. Land that had cost $6,100 was sold for $7,320 cash.
Required:
A. Determine the amount of net 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 shown on the statement of cash flows? `
1. The full sales price of the land, $10,585, would be shown as a cash inflow from financing activities on the statement of cash flows.
2. The full sales price of the land, $10,585, would be shown as a cash inflow from investing activities on the statement of cash flows.
3. The full sales price of the land, $10,585, would be shown as a cash inflow from operating activities on the statement of cash flows.

Answer 1

Ozark Merchandisers

A. Net sales = $22,850

B. Multi Step Income Statement

Net Sales Revenue $22,850

Cost of goods sold 15,060

Gross profit $7,790

Expenses:

Cash discounts 457

Selling and distr 2,340 2,790

Operating income $5,000

Gain from Land 1,220

Interest expense (210)

Income before tax $6,010

C. The interest expense will be shown:

1. Operating activities.

D. The sale of land on the statement of cash flows:

2. The full sales price of the land, $10,585, would be shown as a cash inflow from investing activities on the statement of cash flows.

Step-by-step explanation:

a) Data and Calculations:

Sales Revenue $23,400

Less returns 550

Net sales = $22,850

Cost of goods sold:

Inventory sold $15,500

Inventory returned 440

Cost of sales = $15,060

Cash Discounts = $457 ($22,850 * 2%)

Selling and admin. expenses = $2,340

Interest expense = $210

Gain from sale of land = $1,220 ($7,320 - $6,100)