Falkenberg Company uses the periodic method. They had the following inventory transactions throughout the period. (Assume these are the only transactions for the period). Additionally, Falkenberg had $13,200 of Operating Expenses, $4,500 of Interest Revenue and $3,300 of Interest Expense for the period. March 3: Purchased $160,000 of merchandise from Lin Company under terms 2/10, n/30. March 4: Paid $900 in freight charges to ship goods from Lin Company. March 7: Returned $10,000 of goods to Lin Company that were deemed defective. March 13: Paid the balance due to Lin Company. March 20: Sold goods costing $120,000 to Renner company for $156,000 under terms 1/15, n/30. March 25: Renner returned $14,300 of goods to Falkenberg. The goods cost Falkenberg $11,000. April 4 – Renner paid Falkenberg the balance due. What is Falkenberg’s Net Sales for the period? What is Falkenberg’s Gross Profit on the sale to Renner? (Remember, some goods were returned, so this reduced COGS). Which method of preparing the Income Statement – single step or multiple-step – will yield the higher net income amount? Explain your answer.
Falkenberg Company uses the periodic method. They had the following inventory transactions throughout the period. (Assume these are the only transactions for the period). Additionally, Falkenberg had $13,200 of Operating Expenses, $4,500 of Interest Revenue and $3,300 of Interest Expense for the period. March 3: Purchased $160,000 of merchandise from Lin Company under terms 2/10, n/30. March 4: Paid $900 in freight charges to ship goods from Lin Company. March 7: Returned $10,000 of goods to Lin Company that were deemed defective. March 13: Paid the balance due to Lin Company. March 20: Sold goods costing $120,000 to Renner company for $156,000 under terms 1/15, n/30. March 25: Renner returned $14,300 of goods to Falkenberg. The goods cost Falkenberg $11,000. April 4 – Renner paid Falkenberg the balance due. What is Falkenberg’s Net Sales for the period? What is Falkenberg’s Gross Profit on the sale to Renner? (Remember, some goods were returned, so this reduced COGS). Which method of preparing the Income Statement – single step or multiple-step – will yield the higher net income amount? Explain your answer.
Century 21 Accounting General Journal
11th Edition
ISBN:9781337680059
Author:Gilbertson
Publisher:Gilbertson
Chapter20: Accounting For Inventory
Section: Chapter Questions
Problem 3AP
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Falkenberg Company uses the periodic method. They had the following inventory transactions throughout the period. (Assume these are the only transactions for the period). Additionally, Falkenberg had $13,200 of Operating Expenses, $4,500 of Interest Revenue and $3,300 of Interest Expense for the period.
March 3: Purchased $160,000 of merchandise from Lin Company under terms 2/10, n/30.
March 4: Paid $900 in freight charges to ship goods from Lin Company.
March 7: Returned $10,000 of goods to Lin Company that were deemed defective.
March 13: Paid the balance due to Lin Company.
March 20: Sold goods costing $120,000 to Renner company for $156,000 under terms 1/15, n/30.
March 25: Renner returned $14,300 of goods to Falkenberg.
The goods cost Falkenberg $11,000.
April 4 – Renner paid Falkenberg the balance due.
- What is Falkenberg’s Net Sales for the period?
- What is Falkenberg’s Gross Profit on the sale to Renner? (Remember, some goods were returned, so this reduced COGS).
- Which method of preparing the Income Statement – single step or multiple-step – will yield the higher net income amount? Explain your answer.
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