Reference no: EM132558153

Question - Academy Sales Company (ASC) started the Year 2 accounting period with the balances given in the ?nancial statements model shown as follows. During Year 2, ASC experienced the following business events:

1. Purchased $17,000 of merchandise Inventory on account, terms 2/10, n/30.

2. The goods that were purchased In Event1 were delivered FOB shipping point Freight costs of $610 were paid in cash by the responsible party.

3. Returned $500 of goods purchased In Event 1.

4. (a) Recorded the cash discount on the goods purchased In Event 1.

(b) Paid the balance due on the account payable within the discount period.

5. (a) Recognized $23,000 of cash revenue from the sale of merchandise.

(b) Recognized $16,000 of cost of goods sold.

6. The merchandise In Event 5a was sold to customers FOB destination. Freight costs of $960 were paid in cash by the responsible party.

7. Paid cash of $4,100 for selling and administrative expenses.

8. Sold the land for $6,500 cash.

Required -

a. Record these transactions in a ?nancial statements model.

b. Prepare a schedule of cost of goods sold {Appendix}.

c. Prepare a multi-step Income statement. Include common size percentages on the Income statement.

d. ASC's gross margin percentage in Year 1 was 20 percent Based on the common size data in the income statement, did ASC raise or lower its prices in Year 2 (Appendix)?

e. Assuming a 10 percent rate of growth, what Is the amount of net Income expected for Year 3?