Merchandise accounts and computations LO C2. Kleiner Merchandising Company Accumulated depreciation $700 Beginning inventory 11,000 Ending Inventory 6,600Expenses 2,050 Net Purchases 13,500Net Sales 21,500 Krug Service Company Expenses $9,700 Revenues 26,000 Cash 900Prepaid rent 880 Accounts pavable 200 Equipment 2,500Required:A. Compute gross profit, the goods available for sale, and the cost of goods sold for the merchandiser. B. Use the above information from a service company and from a merchandiser to compute net income, Goods available for sale, Cost of goods sold, Gross profit a. b. Net income for Krug Service Company, Net income for Kleiner Merchandising Company.

(A) Kleiner Merchandising Company:

Goods available for sale = $24,500

Cost of goods sold = $17,900

Gross profit = $3,600

Net income = $1,550

(B) Krug Service Company:

Net income = $16,300

Explanation:

(A) Kleiner Merchandising Company:

Goods available for sale:

= Beginning inventory + Net purchases

= $11,000 + $13,500

= $24,500

Cost of goods sold:

= Goods available for sale - Ending inventory

= $24,500 - $6,600

= $17,900

Gross profit = Net sales - Cost of goods sold

                    = $21,500 - $17,900

                    = $3,600

(b) Kleiner Merchandising Company:

Gross profit = $3,600

Net income = Gross profit - Expenses

                   = $3,600 - 2,050

                   = $1,550

Krug Service Company:

Net income = Revenues - Expenses

                   = $26,000 - $9,700

                   = $16,300

the correct option is c