Financial statement reporting of merchandise inventory
Merchandise inventory is reported as a current asset on the balance sheet as follows.
Christopher Corporation | ||
Assets | ||
Current Assets | ||
Cash and Cash Equivalents | $10,000 | |
Accounts Receivable | $55,000 | |
Less: Allowance for Uncollectible Accounts | 5,000 | 50,000 |
Merchandise Inventory | 270,000 | |
Total Current Assets | $330,000 | |
Property, Plant, and Equipment | ||
Land | $70,000 | |
Buildings | 220,000 | |
Machinery and Equipment | 340,000 | |
Total Property, Plant, and Equipment | $630,000 | |
Other Assets | 10,000 | |
Total Assets | $970,000 | |
Liabilities and Stockholders' Equity | ||
Liabilities | ||
Current Liabilities | ||
Accounts Payable | $135,000 | |
Income Taxes Payable | 25,000 | |
Wages Payable | 10,000 | |
Total Current Liabilities | $170,000 | |
Long-term Liabilities | 340,000 | |
Total Liabilities | $510,000 | |
Stockholders' Equity | ||
Common Stock | $350,000 | |
Retained Earnings | 110,000 | |
Total Stockholders' Equity | $460,000 | |
Total Liabilities and Stockholders' Equity | $970,000 |
The effects of merchandise inventory on the income statement are shown as the cost of goods sold, which is usually the largest expense of merchandising companies.
Christopher Corporation | |
Sales | $600,000 |
Cost of Goods Sold | 360,000 |
Gross Profit | $240,000 |
Operating Expenses | |
Supplies Expense | $13,000 |
Wages Expense | 131,000 |
Insurance Expense | 15,000 |
Rent Expense | 24,000 |
Uncollectible Accounts Expense | 12,000 |
Total Operating Expenses | $195,000 |
Operating Income | $45,000 |
Other Revenues and (Expenses) | 1,000 |
Income Before Taxes | $46,000 |
Income Taxes Expense | 16,000 |
Net Income | $30,000 |
Financial Reporting Summary
The following table summarizes the relationships among the major topics examined in this and previous chapters. The numbers in parentheses refer to the chapters in which the topics were discussed.
Resources | = | Sources of Resources | ||
Assets | = | Liabilities | + | Stockholders' Equity |
Current Assets | Revenues |