Reference no: EM13856362

Comprehensive exercise with sales discounts

Junker's Stash started the 2016 accounting period with the balances given in the financial statements model shown below. During 2016 Junker's Stash experienced the following business events:

1. Paid cash to purchase $90,000 of merchandise inventory.

2. The goods that were purchased in Event 1 were delivered FOB destination. Freight costs of $1,800 were paid in cash by the responsible party.

3a. Sold merchandise for $102,000 under terms 1/10, n/30.

3b. Recognized $51,900 of cost of goods sold.

4a. Junker's Stash customers returned merchandise that was sold for $2,500.

4b. The merchandise returned in Event 4a had cost Junker's Stash $1,450.

5. The merchandise in Event 3a was sold to customers FOB destination. Freight costs of $1,850 were paid in cash by the responsible party.

6a. The customers paid for the merchandise sold in Event 3a within the discount period. Recognized the sales discount.

6b. Collected the balance in the accounts receivable account.

7. Paid cash of $7,350 for selling and administrative expenses.

8. Sold the land for $10,100 cash.

Required:

a. Record the above transactions in a financial statements model. The first event is recorded as an example. (In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. Enter any decreases to account balances and cash outflows with a minus sign.)

b. Determine the amount of net sales. (Round your answer to 1 decimal place.)

c. Prepare a multistep income statement. Include common size percentages on the income statement.(Round your answers to 1 decimal place.)

d. Junker's Stash return on sales ratio in 2015 was 12 percent. Based on the common size data in the income statement, did Junker's Stash expenses increase or decrease in 2016?