A merchandiser uses a perpetual inventory system The beginni

A merchandiser uses a perpetual inventory system. The beginning Owner, Capital balance of the merchandiser was $130,000. During the year, Sales Revenue amounted to $80,000, Sales Returns and Allowances were $2,000, Sales Discounts were $4,000, Cost of Goods Sold was $40,000, and all other expenses totaled $12,000. The company paid $27,000 in withdrawals to the owner. The ending balance of Owner, Capital would be OA. $118,000 O B. $129,000 OC. $125,000 O D. $130,000

Solution

SOLUTION

The ending balance of Owner, capital would be - $125,000

Net sales = Sales revenue - Sales return and allownaces - Sales discount

= $80,000 - $2,000 - $4,000 = $74,000

Net income = Net sales - Cost of goods sold - Expenses

= $74,000 - $40,000 - $12,000 = $22,000

Ending balance = Beginning balance + Net Income - Drawings

= $130,000 + $22,000 - $27,000

= $125,000