Page 260 - Accounting Principles (A Business Perspective)

6. Merchandising transactions

LYONS COMPANY
Income Statement
For the Month Ended 2010 December 31
Operating revenues:
Gross sales $14,600
Less: Sales discounts $ 44
Sales return and allowances 20 64
Net sales $14,536
Cost of goods sold:
Merchandise inventory, 2010 January 1 $ 7,000
Purchases $ 6,000
Less: Purchase discount $ 82
Purchase returns and allowances 100 182
Net purchases $5,818
Add: Transportation-in 75
Net cost of purchases 5,893
Cost of goods available for sale $12,893
Less: Merchandise inventory, 2010 December 31 8,000
Cost of goods sold 4,893
Gross Margin $ 9,643
Operating expenses:
Miscellaneous selling expense $2,650
Miscellaneous administrative expense 1,150
Total operating expenses 3,800
Net income $ 5,843

Exhibit 41: Income statement for a merchandising company
LYONS COMPANY
Statement of Retained Earnings
For the Month Ended 2010 December 31
Retained earnings, 2010 December 1 $15,000
Add: Net income for the month 5,843
Total $20,843
Deduct: Dividends 2,000
Retained earnings, 2010 December 31 $18,843
Exhibit 42: Statement of retained earnings
LYONS COMPANY
Balance Sheet 2010 December 31
Assets
Cash $19,663
Accounts receivable 1,880
Merchandise inventory 8,000
Total assets $29,543
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable $ 700
Stockholders' equity:
Capital stock $ 10,000
Retained earnings 18,843
Total stockholders' equity Total liabilities and 28,843
stockholders' equity $29,543
Exhibit 43: Balance sheet for a merchandising company

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