Use the Following Financial Information to Find the Entry You

question 97

Multiple Choice

Use the following financial information to find the entry you would make on an income statement for NET INCOME (LOSS) for the year ended December 31, 2011: Gross Sales, $110,000; Sales Returns and Allowances, $8,000; Sales Discounts, $2,400; Merchandise Inventory, January 1, 2011, $50,000; Merchandise Inventory, December 31, 2011, $43,100; Net Purchases, $80,500; Freight In, $975; Salaries, $92,900; Rent, $15,500; Utilities, $1,275; Insurance, $2,450; and Income Tax, $15,650.

• A) $23,458
• B) ($98,544)
• C) $65,782
• D) ($116,550)

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Definitions:

Work In Process

An inventory category that refers to partially completed goods that are still in production.

FIFO Method

"First In, First Out" method, an inventory costing technique that assumes the first items added to inventory are the first ones sold.

Beginning Inventory

The value of all the inventory held by a business at the start of an accounting period.

Equivalent Units

A concept in cost accounting used to express the amount of work done on incomplete units in terms of fully completed units.