Accounting and Finance Foundations

Unit 7

Accounting and Finance Foundations Unit 7: Financial Statements 553

Financial Statements

Chapter 18

Student Assignment

18.1.2 Income Statement Questions

1. Learning which items belong in each of the income statement categories is an important first step in un-
   derstanding their meaning. On your own, mark each of the following income statement items as revenue
   (R) or expense (E).

___ Cost of Goods Sold ___ Sales

___ Income Tax ___ Selling Expenses

2. Whitney’s Shoe Store had sales of $85,650. Sales returns and allowances for the year total $1,450. What
   were the net sales?


3. In the month of June, Wes’s Basketball Shop had sales of $8,790. In that same month, sales returns and
   allowances were $670. How much were Wes’s net sales?


4. Find the cost of goods sold if the beginning inventory was $42,980; purchases made during the period
   totaled $12,700; and the inventory on hand at the end of the period was $39,875.


5. If beginning inventory March 1 totaled $65,500; total purchases during March totaled $18,980; and the
   ending inventory on March 31 was $75,340; what is the cost of goods sold?


6. Shiloh’s Skate Shop had gross profit of $24,500 in June. It also had these expenses for the month: salaries
   and wages, $4,300; rent, $1,500; utilities, $950; advertising, $145; and other expenses, $1,075. What
   was the store’s net income or net loss?


7. What is the name of the operating expense account on the income statement for uncollectible accounts?


8. What are the three methods of calculating the value of inventory?


9. What does it mean to ship something FOB shipping point?


10. What does it mean to ship something FOB destination point?