McNeil Merchandising Company
Accumulated depreciation	$ 700
Beginning inventory	8,500
Ending inventory	4,500
Expenses	1,800
Net purchases	9,500
Net sales	16,500
Krug Service Company
Expenses	$ 8,100
Revenues	21,000
Cash	600
Prepaid rent	640
Accounts payable	200
Equipment	1,900
Compute the goods available for sale, the cost of goods sold and gross profit for the merchandiser. Hint: Not all information may be necessary.
Compute net income for each company. a. Goods available for sale
a. Cost of goods sold
a. Gross profit
b. Net income for Krug Service Company
b. Net income for McNeil Merchandising Company

To compute the values requested, we will use the provided information for each company.

### McNeil Merchandising Company
For a merchandising company, we typically need to calculate the following:

1. **Goods Available for Sale**:
   \[
   \text{Goods Available for Sale} = \text{Beginning Inventory} + \text{Net Purchases}
   \]

2. **Cost of Goods Sold (COGS)**:
   \[
   \text{COGS} = \text{Goods Available for Sale} - \text{Ending Inventory}
   \]

3. **Gross Profit**:
   \[
   \text{Gross Profit} = \text{Net Sales} - \text{COGS}
   \]

4. **Net Income**:
   \[
   \text{Net Income} = \text{Gross Profit} - \text{Expenses}
   \]

Let’s calculate each step-by-step.

#### Step 1: Goods Available for Sale
\[
\text{Goods Available for Sale} = 8,500 + 9,500 = 18,000
\]

#### Step 2: Cost of Goods Sold
\[
\text{COGS} = 18,000 - 4,500 = 13,500
\]

#### Step 3: Gross Profit
\[
\text{Gross Profit} = 16,500 - 13,500 = 3,000
\]

#### Step 4: Net Income for McNeil Merchandising Company
\[
\text{Net Income} = 3,000 - 1,800 = 1,200
\]

### Krug Service Company
For a service company, we typically calculate **Net Income** as follows:

\[
\text{Net Income} = \text{Revenues} - \text{Expenses}
\]

#### Net Income for Krug Service Company
\[
\text{Net Income} = 21,000 - 8,100 = 12,900
\]

### Summary of Results
- **McNeil Merchandising Company**:
  - Goods Available for Sale: $18,000
  - Cost of Goods Sold: $13,500
  - Gross Profit: $3,000
  - Net Income: $1,200

- **Krug Service Company**:
  - Net Income: $12,900

Would you like further clarification on any part? Here are some related questions to explore this further:

1. How do changes in ending inventory affect the cost of goods sold?
2. Why are beginning and ending inventories important in calculating net income for merchandising companies?
3. What is the significance of gross profit for a merchandising company?
4. How would prepaid rent affect the income statement if adjusted?
5. In what scenarios would accumulated depreciation be necessary in these calculations?

**Tip:** In merchandising, maintaining accurate records of beginning and ending inventories is crucial for accurately determining profitability.

McNeil Merchandising Company
Accumulated depreciation	$ 700
Beginning inventory	8,500
Ending inventory	4,500
Expenses	1,800
Net purchases	9,500
Net sales	16,500

Krug Service Company
Expenses	$ 8,100
Revenues	21,000
Cash	600
Prepaid rent	640
Accounts payable	200
Equipment	1,900

Compute the goods available for sale, the cost of goods sold and gross profit for the merchandiser.
Compute net income for each company.

Learn how to compute the goods available for sale, cost of goods sold (COGS), and gross profit for McNeil Merchandising Company, along with the net income for both McNeil Merchandising and Krug Service Company. This solution covers financial accounting fundamentals, including inventory management and profit calculation, ideal for undergraduate students in accounting and finance.

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