Academy Sales Company (ASC) started the 2012 accounting period with the balances given in the financial statements model shown below. During 2012 ASC experienced the following business events.
1. Purchased $16,000 of merchandise inventory on account, terms 2/10, n/30.
2. The goods that were purchased in Event 1 were delivered FOB shipping point. Freight costs of $600 were paid in cash by the responsible party.
3. Returned $500 of goods purchased in Event 1.
4a. Recorded the cash discount on the goods purchased in Event 1.
4b. Paid the balance due on the account payable within the discount period.
5a. Recognized $21,000 of cash revenue from the sale of merchandise.
5b. Recognized $15,000 of cost of goods sold.
6. The merchandise in Event 5a was sold to customers FOB destination. Freight costs of $950 were paid in cash by the responsible party.
7. Paid cash of $4,000 for selling and administrative expenses.
8. Sold the land for $5,600 cash.
Required
a. Record the above transactions in a financial statements model like the one shown below.
b. Prepare a schedule of cost of goods sold. (Appendix)
c. Prepare a multistep income statement. Include common size percentages on the income statement.
d. ASC’s gross margin percentage in 2011 was 22%. Based on the common size data in the income statement, did ASC raise or lower its prices in 2012? (Appendix)
e. Assuming a 10 percent rate of growth, what is the amount of net income expected for 2013?
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