Tsang Inc. purchases its inventory on credit and uses a

Tsang Inc. purchases its inventory on credit and uses a perpetual inventory system. The company began operations on January 1, 2018, and during 2018 purchased merchandise costing $200,000. Of this amount, 75% was paid in 2018 with the balance paid in 2019. The company sold 80% of its inventory for $400,000 on credit. Of this amount, 80% was collected in 2018 with the rest collected in 2019. Operating expenses of $140,000 were incurred in 2018 and all were paid by the end of the year. The income tax rate is 30% and all income taxes relating to 2018 were paid in 2019. The following table indicates key amounts on the 2018 financial statements:
____________________________________2018
Income statement data
Sales..............................................................[1]
Cost of goods sold........................................[2]
Gross profit...................................................[3]
Operating expenses.......................................[4]
Income before income tax.............................[5]
Income tax expense.......................................[6]
Net income....................................................[7]
Statement of financial position data
Accounts receivable......................................[8]
Inventory......................................................[9]
Accounts payable........................................[10]
Income tax payable.....................................[11]
Instructions
(a) Calculate the balances for Sales and Accounts Receivable (items 1 and 8 above).
(b) Calculate the balances for Cost of Goods Sold, Inventory, and Accounts Payable (items 2, 9, and 10 above).
(c) Calculate the gross profit, the balance in Operating Expenses, and the income before income tax (items 3, 4, and 5 above).
(d) Calculate the balances for Income Tax Expense, net income, and Income Tax Payable (items 6, 7, and 11 above).
(e) Calculate the gross profit margin and profit margin for the company. All companies in this industry sell their products at approximately the same price and incur income tax at the same rate. If the company's gross profit margin and profit margin are lower than the industry average, what are the most likely explanations for this?
Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

Members

  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION

OR

Non-Members

Get help from Cost Accounting Tutors
Ask questions directly from Qualified Online Cost Accounting Tutors .
Best for online homework assistance.