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Format for multiple step income statement
ABC Company
Income Statement
For the year ended Dec 31st 2016
Gross Sale 100,000
Sale Discount 2000
Sales returns and allowances 1000
Net Sales 97000
Opening balance of inventory 50000
+ Purchases 50000
Purchase Discounts 1000
Purchase Returns 1000
+ Direct Expenses 1000
Net Purchases 49000
GAFS 99000
Closing Balance of inventory 45000
COGS 54000
Gross Profit 43000
Operating Expenses
Marketing & selling Expense 5000
Admin Expenses 10000
Total operating Expenses 15000

Operating Income 28000
Interest revenue 2500
Dividend 1500
+ Other Income 4000
Earning Before interest & Taxes 32000
Interest Expenses 3000
Earning Before Taxes 29000
Taxes 4350
Net Profit 24650
Transactions Related to Inventory
Seller sale 50 pairs of merchandise at price 100 with the credit term 2/10,net/30 to Buyer. Delivery charges equally distributed between buyer and seller and were paid in cash amounting to 500. Buyer return 10 pairs to seller and seller credit his account at full invoice price. Record the transaction for buyer and seller. Assume that both uses perpetual inventory system. Merchandise cost was 40. Buyer uses net cost method

Buyer
Seller
1
Explanation
Dr.
Cr.
Explanation
Dr.
Cr.
 
Inventory
4900
 
Account Receivable
5000
 

Account payable
 
4900
Sales Revenue
 
5000

 
 
 
COGS
4000
 

 
 
 
Inventory
 
4000
2
Transportation Expense
250
 
Transportation Expense
250
 

Cash
 
250
Cash
 
250
3
Account payable
490
 
Sales Return & Allowances
500
 

Inventory
 
490
Account Receivable
 
500

 
 
 
Inventory
400
 

 
 
 
COGS
 
400
4
Account payable
4410
 
Cash
4410
 

Cash
 
4410
Sales Discount (4500*2%)
90
 




Account Receivable
 
4500
5
Account payable
4410
 
Cash
4500
 

Purchase Discount Lost
90
 
Account Receivable
 
4500

Cash
 
4500
 
 
 

Transaction1: Purchase/Sale, Transaction 02: Delivery Expense, Transaction 3: Return within the discount period, Transaction 4: payment within Discount Period, Transaction 05: Payment after Discount Period
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