Reference no: EM132827615

Smith Engineering uses the periodic inventory system and has a December 31st year-end. The company began the year with inventory with a cost of $17,500. When Smith's staff counted inventory at December 31, inventory with a cost of $22,500 were on hand.

The company also had the following account balances for the year (random order, all with normal balances):

Office Supplies Expense $ 4,700
Purchases 235,000
Sales Discounts 2,400
Advertising Expense 9,800
Interest Income 2,000
Freight In 15,800
Freight Out 12,200
Salesperson Salaries 61,500
Sales Returns and Allowances 10,200
Loss on Sale of PP&E 550
Purchase Returns and Allowances 9,800
Sales Revenue 400,000
Purchase Discounts 1,800
Management Salaries 20,000

Problem 1: Multi-Step Income Statement (to the Gross Margin line only) for the year-ended December 31, 2020