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# Solve this problem

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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
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

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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