Question: Use the data for BizKid Company in Problem 5-4A to complete the following requirements.
Required: 1. Prepare closing entries as of August 31, 2011 (the perpetual inventory system is used). Analysis Component
2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount. Does it appear that the company's cash management system is accomplishing the goal of taking all available discounts? Explain.
3. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means approximately 5% of its gross sales were eventually returned outright or caused the company to grant allowances to customers. How do this year's results compare to prior years' results?
Problem 5-4A: BizKid Company's adjusted trial balance on August 31, 2011, its fiscal year-end, follows.
On August 31, 2010, merchandise inventory was $25,000. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs.
Invoice cost of merchandise purchases . . . . . . . . $91,000
Purchase discounts received . . . . . . . . . . . . . . . . . 1,900
Purchase returns and allowances . . . . . . . . . . . . . 4,400
Costs of transportation-in . . . . . . . . . . . . . . . . . . 3,900
Required: 1. Compute the company's net sales for the year.
2. Compute the company's total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.