Use the data for BizKid Company in Problem 5-4A to complete the following requirements. Required… 1 answer below »

Use the data for BizKid Company in Problem 5-4A to complete the following requirements.

Required

1. Prepare closing entries as of August 31, 2011 (the perpetual inventory system is used). Analysis Component

2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount. Does it appear that the company’s cash management system is accomplishing the goal of taking all available discounts? Explain.

3. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means approximately 5% of its gross sales were eventually returned outright or caused the company to grant allowances to customers. How do this year’s results compare to prior years’ results?

Problem 5-4A

BizKid Company’s adjusted trial balance on August 31, 2011, its fiscal year-end, follows.

On August 31, 2010, merchandise inventory was $25,000. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs.

Invoice cost of merchandise purchases . . . . . . . . $91,000

Purchase discounts received . . . . . . . . . . . . . . . . . 1,900

Purchase returns and allowances . . . . . . . . . . . . . 4,400

Costs of transportation-in . . . . . . . . . . . . . . . . . . 3,900

Required

1. Compute the company’s net sales for the year.

2. Compute the company’s total cost of merchandise purchased for the year.

3. Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.

4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

 

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