Multi-Step Income Statement – Cavite Merchandising (2019)

18 Q-and-A flashcards covering the structure, formulas, and key 2019 figures of Cavite Merchandising’s multi-step income statement.

What is the formula for computing Net Sales on a multi-step income statement?

Net Sales = Gross Sales – Sales Returns & Allowances – Sales Discounts.

How much were Cavite Merchandising’s Gross Sales for 2019?

₱782,000.

What amounts did Cavite Merchandising report for Sales Returns & Allowances and Sales Discounts in 2019?

Sales Returns & Allowances = ₱32,000; Sales Discounts = ₱48,000.

What was Cavite Merchandising’s Net Sales for 2019 after deducting returns and discounts?

₱702,000.

State the general formula for Cost of Goods Sold (Cost of Sales) for a merchandising company.

COGS = Beginning Merchandise Inventory + Net Purchases + Freight-In – Ending Merchandise Inventory.

How is Net Purchases computed?

Net Purchases = Purchases – Purchase Returns & Allowances – Purchase Discounts.

Where is Freight-In reported in a multi-step income statement?

Freight-In is added to Net Purchases in the Cost of Goods Sold section.

What was Cavite Merchandising’s Beginning and Ending Merchandise Inventory for 2019?

Beginning Inventory = ₱180,000; Ending Inventory = ₱120,000.

What total Cost of Sales did Cavite Merchandising report for 2019?

₱230,000.

Define Gross Profit and give Cavite Merchandising’s 2019 figure.

Gross Profit = Net Sales – Cost of Sales; Cavite Merchandising’s Gross Profit was ₱472,000.

Name the two main categories of Operating Expenses on a multi-step income statement.

1) Distribution/Selling Expenses and 2) Administrative/General Expenses.

List the three distribution (selling) expense items disclosed by Cavite Merchandising.

Sales Salaries Expense, Depreciation – Store Equipment, Utilities Expense – Store.

What was the total Distribution (Selling) Expense for Cavite Merchandising in 2019?

₱65,800.

Give two examples of Administrative (General) Expenses shown in the statement.

Office Salaries Expense and Utilities Expense – Office (others include Office Supplies and Bad Debts Expense).

What total amount of Administrative Expenses did Cavite Merchandising incur in 2019?

₱43,900.

How are Other Income items presented, and what two examples were reported?

Other Income is shown after Gross Profit; Cavite Merchandising reported Interest Income (₱30,000) and Rent Income (₱20,000).

Differentiate ‘Other Expenses’ from ‘Financial Cost’ on the statement.

Other Expenses are non-operating losses (e.g., Loss on Sale of Equipment); Financial Cost specifically relates to borrowing (e.g., Interest Expense).

What was Cavite Merchandising’s Net Income for 2019 after all expenses, other items, and financial costs?

₱407,800.