Use the following information (in random order) from a merchandising company and from a service company. McNeil Merchandising Company Accumulated depreciation $ 700 Beginning inventory 11,500 Ending inventory 6,900 Expenses 2,100 Net purchases 14,300 Net sales 22,500 Krug Service Company Expenses $ 8,700 Revenues 27,000 Cash 700 Prepaid rent 680 Accounts payable 200 Equipment 2,500 a. Compute the goods available for sale, the cost of goods sold and gross profit for the merchandiser. Hint: Not all information may be necessary. b. Compute net income for each company.

Answer and Explanation:

a. The computation of the goods available for sale, the cost of goods sold and gross profit for the merchandiser is shown below:

Goods available for sale      

Beginning inventory $11,500    

Add:Net purchases $14,300    

Goods available for sale $25,800  

Cost of goods sold      

Goods available for sale $25,800    

less: Ending inventory -$6,900    

Cost of goods sold $18,900  

Gross profit      

net sales  $22,500    

less:cost of goods sold-$18,900    

Gross profit $3,600

b. The net income for each company is shown below:

Net income for Krug Service company    

Revenues $27,000    

less: Expenses -$8,700    

Net income for Krug Service company $18,300  

Net income for Kliener Merchandising Co    

Gross profit $3,600    

less:Expenses -$2,100    

Net income for Kliener Merchandising Co $1,500

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