Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000 Required: 1. Prepare a traditional income statement.

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Business

Adelaide Mcintyre

6 August, 16:38

Cherokee Inc. is a merchandiser that provided the following information: Number of units sold 20,000 Selling price per unit $ 30 Variable selling expense per unit $ 4 Variable administrative expense per unit $ 2 Total fixed selling expense $ 40,000 Total fixed administrative expense $ 30,000 Beginning merchandise inventory $ 24,000 Ending merchandise inventory $ 44,000 Merchandise purchases $ 180,000 Required: 1. Prepare a traditional income statement.

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Kamari Butler · Answer 1

In order to find Net Income as per traditional income statement, we will first require to calculate cost of goods sold as below:

Beginning Merchandise Inventory ... 24000

Add: Purchases ... 180000

Less: Ending Merchandise Inventory ... (44000)

Cost of Goods Sold ... 160000

Traditional Income Statement

Sales ... 600000

Less: Cost of Goods Sold ... (160000)

Gross Profit ... 440000

Less: Selling and Administrative Expenses

Variable Selling Expense ... 80000

Variable Admin Expense ... 40000

Fixed Selling Expense ... 40000

Fixed Admin Expense ... 30000

Total ... (190000)

Net Income ... 250000