EXERCISE 5-1
| Purpose: | (L.O. 1) This exercise will help you to identify the relationships among the components involved in measuring net income for a merchandising company. |
The following information applies to The Sports Shop for 2014:
| Sales | $748,000 |
| Sales returns | 10,000 |
| Sales discounts | 7,000 |
| Cost of goods sold | 388,000 |
| Sales commissions expense | 107,700 |
| Advertising expense | 16,800 |
| Executive salaries expense | 100,000 |
| Utilities expense | 25,000 |
| Insurance expense | 6,000 |
| Freight-out | 8,000 |
| Interest revenue | 5,500 |
| Interest expense | 7,200 |
Instructions
(a) Compute net sales for 2014.
(b) Compute gross profit for 2014.
(c) Compute total operating expenses for 2014.
(d) Compute net income for 2014.
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