Question

Marketing and advertising costs

$54,000

Merchandise inventory, January 1, 2017

92,000

Shipping of merchandise to customers

2,000

Depreciation on Store Fixtures

9,000

Purchases

523,000

General and administrative costs

70,000

Merchandise inventory, December 31, 2017

109,000

Merchandise freight-in

22,000

Purchase returns and allowances

20,000

Purchase discounts

20,000

Revenues

630,000

The following data are for

MeedMeed

Retail Outlet Stores. The account balances​ (in thousands) are for

20172017.

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Requirements

1.

Compute ​(a) the cost of goods purchased and ​(b) the cost of goods sold.

2.

Prepare the income statement for
20172017.

Requirement 1. Compute ​(a) the cost of goods purchased and ​(b) the cost of goods sold.

​(a) Begin by completing the schedule of cost of goods purchased.

Meed Retail Outlet Stores

Schedule of Cost of Goods Purchased

For the Year Ended December 31, 2017 (in thousands)

Purchases

Add:

Deduct:

Cost of goods purchased

Answer 1

a) Cost of Goods Purchased is $ 505,000

b) Cost of Goods sold is $ 499,000

Explanation:

1) a.Schedule of Cost of Goods Purchased is given below;

Cost of Goods Purchased = (Purchases + Freight in & Freight out)- (Purchase returns+ Purchase Discounts)

Cost of Goods Purchased= ($ 523,000+$ 2000+ $22000 ) - ($ 20000+ $ 20000).

Cost of Goods Purchased = $ 505,000.

b. Cost of goods Sold

Cost of Goods sold = opening inventory + Purchases+ Freight in & Freight out- Purchase returns & discounts+ Direct Labor+ Factory Overhead- Ending inventory

Cost of Goods sold= $ 92,000 +$ 523000 +$ 2000+$ 22000 - ($20000+$ 20000) + $ 9000- $109000.

Cost of goods sold = $ 499,000.

2) Income Statement for 2017.

Revenue = $ 630,000

Cost of Goods Sold= ($ 499000)

Marketing and advertising costs = ($ 54000)

General and administrative costs = ($ 70000)

Net Income = $ 7000