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PROBLEM 3-28 (Appendix)
a.
Balance Sheet
Income Statement
Statement of
Event
No.
Cash
Accts.
Rec.
Mdse. Inv.
Land
=
Accts. Pay
+
C. Stock
Ret. Earn.
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Bal.
52,000
8,000
100,000
NA
8,000
86,000
66,000
1.
(40,000)
NA
NA
40,000
NA
NA
NA
NA
NA
NA
(40,000) IA
2.
NA
NA
252,000
NA
252,000
NA
NA
NA
NA
NA
NA
3.
(2,000)
NA
2,000
NA
NA
NA
NA
NA
NA
NA
(2,000) OA
4.
NA
NA
(7,200)
NA
(7,200)
NA
NA
NA
NA
NA
NA
5.
172,000
NA
NA
NA
NA
NA
172,000
172,000
NA
172,000
172,000 OA
6.
NA
240,000
NA
NA
NA
NA
240,000
240,000
NA
240,000
NA
7a.1
NA
NA
(2,448)
NA
(2,448)
NA
NA
NA
NA
NA
NA
7b2
(242,352)
NA
NA
NA
(242,352)
NA
NA
NA
NA
NA
(242,352) OA
8.
(23,200)
NA
NA
NA
NA
NA
(23,200)
NA
23,200
(23,200)
(23,200) OA
9a.3
NA
(1,900)
NA
NA
NA
NA
(1,900)
(1,900)
NA
(1,900)
NA
9b.4
93,100
(93,100)
NA
NA
NA
NA
NA
NA
NA
NA
93,100 OA
10.
62,000
(62,000)
NA
NA
NA
NA
NA
NA
NA
NA
62,000 OA
11
(13,200)
NA
NA
NA
NA
NA
(13,200)
NA
13,200
(13,200)
(13,200) OA
12.5
NA
NA
(291,252)
NA
NA
NA
(291,252)
NA
291,252
(291,252)
NA
Bal.
58,348
91,000
53,100
40,000
8,000
86,000
148,448
410,100
327,652
82,448
6,348 NC
1$252,000 − $7,200 = $244,800; $244,800 X 1% = $2,448
2$244,800 − $2,448 = $242,352
PROBLEM 3-28 (cont.) (Appendix)
b.
Cal’s Grocery
Schedule of Cost of Goods Sold
Beginning Inventory 1/1/2014
$100,000
Purchases
252,000
Purchase Discounts
(2,448)
Purchase Returns and Allow.
(7,200)
Transportation-in
2,000
Cost of Goods Available for Sale
$344,352
Ending Merchandise Inventory
(53,100)
Cost of Goods Sold
$291,252
PROBLEM 3-28 b. (cont.) (Appendix)
Cal’s Grocery
Financial Statements
For the Year Ended December 31, 2014
Income Statement
Revenue
Sales Revenue
$412,000
Sales Discounts
(1,900)
Net Sales
$410,100
Cost of Goods Sold
(291,252)
Gross Margin
118,848
Operating Expenses
Selling Expenses
$ 23,200
Other Operating Expense
13,200
Total Operating Expense
(36,400)
Net Income
$ 82,448
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ 86,000
3-3
Plus: Stock Issued
-0-
Ending Common Stock
$ 86,000
Beginning Retained Earnings
$ 66,000
Plus: Net Income
82,448
Ending Retained Earnings
148,448
Total Stockholders’ Equity
$234,448
ATC 3-1
Dollar amounts are in millions.
b. Cost of sales ÷ Sales = %
$50,568 ÷ $71,960 = 70.3%
c. According to Note 3, “Cost of Sales and Selling, General and Administrative Expenses,” Cost
of sales includes:
Total cost of products sold including
Outbound shipping and handling expenses associated with sales to our guests
Payment terms cash discount
Distribution center costs, including compensation and benefits costs
Import cost
d. According to Note 2, “Revenue from gift card sales is recognized upon gift card redemption.
Our gift cards do not have expiration dates.”
ATC 3-2
a. (1)
Calculate cost of goods sold:
First
Quarter
Second Quarter
Third Quarter
Fourth
Quarter
Sales
$736.0
$717.4
$815.2
$620.1
Less: gross margin
(461.9)
(440.3)
(525.3)
(252.3)
Cost of goods sold
$274.1
$277.1
$289.9
$367.8
Calculate operating expenses:
3-4
First
Quarter
Second Quarter
Third Quarter
Fourth
Quarter
Gross margin
$461.9
$440.3
$525.3
$252.3
Less: net income
( 37.1)
( 24.6)
( 38.6)
(31.4)
Operating expenses
$424.8
$415.7
$486.7
$220.9
Multistep income statements
First
Quarter
Second Quarter
Third Quarter
Fourth
Quarter
Sales
$736.0
$717.4
$815.2
$620.1
Less: cost of goods sold
(274.1)
(277.1)
(289.9)
(367.8)
Gross margin
461.9
440.3
525.3
252.3
Less: operating expenses
(424.8)
(415.7)
(486.7)
(220.9)
Net income
$ 37.1
$ 24.6
$ 38.6
$ 31.4
a. (2)
Gross margin percentage:
Quarter
Gross Margin
Sales
=
Gross margin %
First
$461.9
$736.0
=
62.8%
Second
$440.3
$717.4
=
61.4%
Third
$525.3
$815.2
=
64.4%
Fourth
$252.3
$620.1
=
40.7%
ATC 3-2 a. (cont.)
a. (2)
Cost of goods sold percentage:
Quarter
1 − Gross margin %
=
Cost of goods sold %
First
1.00 − .628
=
37.2%
Second
1.00 − .614
=
38.6%
Third
1.00 − .644
=
35.6%
Fourth
1.00 − .407
=
59.3%
a. Some points the students may mention include:
The sales increase in the third quarter can be attributed to sales for the Christmas season.
The reason for the dip in gross margin the last quarter might be the company’s effort to increase
sales for the year end and sell old merchandise by reducing the gross margin.
ATC 3-3
These answers are based on the 2012 fiscal year and all dollar amounts are in millions.
a. Net income ÷ Net sales = %
$ (39) ÷ $61,093 = (0.06)%
c. According to the explanation in the “Revenue” Note:
We recognize revenue from product sales or services rendered when the following four revenue
d. As explained in the “Cost of Sales” note, Amazon includes the cost of shipping goods to its
customers in Cost of Sales.ATC 3-4
a.
This writing assignment tests both analytical and writing skills.
Some of the analytical amounts that should be included are:
For 2014
b. The president of the company may want to show a higher net income and higher sales for 2014 for
the purpose of obtaining a loan or securing other capital. Also, if the president receives a bonus
that is based on net income, delaying the recognition of the sales return will act to increase his
