Question

Tom Reynold is the sole proprietor of Pretty Pets​, a business specializing in the sale of​ high-end pet gifts and accessories. Pretty Pets​' sales totaled $ 986 comma 000 during the most recent year. During the​ year, the company spent $ 52 comma 000 on expenses relating to website​ maintenance, $ 31 comma 300 on​ marketing, and $ 29 comma 500 on​ wrapping, boxing, and shipping the goods to customers. Pretty Pets also spent $ 640 comma 000 on inventory purchases and an additional $ 18 comma 000 on​ freight-in charges. The company started the year with $ 18 comma 250 of inventory on hand and ended the year with $ 18 comma 400 of inventory. Prepare Pretty Pets​' income statement for the most recent year.

Answer 1

Answer and Explanation:

For preparing the income statement first we have to determine the cost of goods sold which is shown below:

Beginning inventory $18,250

Add Inventory purchase ($640,000 + $18,000) $658,000

Total goods available for sale $676,250

Less: Ending inventory ($18,400)

Cost of goods sold $657,850

Now the preparation of the income statement is presented below:

Income statement

Sales $986,000

Less: Cost of goods sold - $657,850

Gross profit $328,150

Less: Operating expenses

Expenses relating to website maintenance -$52,000

Marketing exp -$31,300

wrapping, boxing, and shipping Exp -$29,500

Net income $215,350