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Income statement and accounts for merchandiser For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was $114,800,000. a. What was the amount of gross profit? b. If total operating expenses were $18,250,000, could you determine net income? c. Is Customer Refunds Payable an asset, liability, or owner’s equity account, and what is its normal balance? d. Is Estimated Returns Inventory an asset, liability, of owner’s equity account, and what is its normal balance?

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 6, Problem 6.22EX
Textbook Problem

Income statement and accounts for merchandiser

For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was $114,800,000.

  1. a. What was the amount of gross profit?
  2. b. If total operating expenses were $18,250,000, could you determine net income?
  3. c. Is Customer Refunds Payable an asset, liability, or owner’s equity account, and what is its normal balance?
  4. d. Is Estimated Returns Inventory an asset, liability, of owner’s equity account, and what is its normal balance?

Expert Solution

(a)

To determine

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Calculate: The amount of gross profit.

Explanation of Solution

Gross profit represents the revenue after the deduction of cost of goods sold from the net sales of a business. Its mathematical representation is as below:

Gross profit=SalesCost of merchandise sold

Calculate the amount of gross profit.

Sales = $191,350,000

Cost of merchandise sold = $114,800,000

Gross profi

Expert Solution

(b)

To determine

To Explain: Whether net income can be calculated by the help of operating expenses.

Expert Solution

(c)

To determine

To Describe: The head and normal balance of customer refunds payable account.

Expert Solution

(d)

To determine

To Describe: The head and normal balance of estimated returns inventory account.

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Chapter 6 Solutions

Accounting
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