Prepare a multiple-step income statement for Armour Co. from the following data for the year ended December

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Question:

Prepare a multiple-step income statement for Armour Co. from the following data for the year ended December 31, 2010.

Sales, $905,000; cost of merchandise sold, $540,000; administrative expenses, $10,000; interest expense, $20,000; rent revenue, $25,000; sales returns and allowances, $35,000; selling expenses, $90,000.

Which of the following costs would be included in merchandise inventory?

(a)	Purchase price
(b)	Insurance in transit
(c)	Freight for delivery FOB shipping point
(d)	Repair due to negligence of receiving clerk
(e)	Receiving Department employee salary
(f)	Cost of processing purchase orders

For each of the following, calculate the cost of inventory reported on the balance sheet.

(a)	The total merchandise on hand at the end of the year as determined by taking a physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier.
(b)	The total merchandise inventory counted at the end of the year was $63,000. Purchases for $6,000 are in transit under FOB shipping point terms.
(c)	The total merchandise inventory counted at the end of the year was $75,000. Purchases for $5,000 are in transit under FOB destination terms.