Harry\'s Haberdashery is a retail clothing store for men.The store operates out

Question

Harry's Haberdashery is a retail clothing store for men.The store operates out of a rented building in albertsville,Virginia shown below is the store adjusted year end trial balance dated.Dec 31 2007.
Herry haberdashery
Adjuested Trial balance
Dec 31, 2007
Cash...............................39,270$
A/c Receivable................... 4400
Merchandise Envantory..........29,700
Prepaid rent.........................3100
Office Supplies.......................1500
Office Equipment...................70,000
Accumalated depreciation:Office equipment.........20,000
A/C Payable................................................22,000
Sales Tax Payable...........................................5,000
Cpital Stock.................................................31,000
Retained Earnings..........................................36,000
Sales.........................................................384,000
Sales Returns and allowances........4,000
Cost of good sole......................157630
Purchased Discount lost...................400
Utility Expense............................7,000
Office Supply Expense......................900
Deprecision Expense:office equipment..4700
Rent Expense...............................10,000
Insurance Expense.........................1500
Salaries Expense...........................150,000
Income Tax expense......................13,900
$498,000 $498000

(a)Prepare an income statment of heery haberdashery dated dec,31 2007
(B) Compute the stores gross profit margen as a %age of net sales
(c) Do the stores customer seem to be satisfies with there purchases, define your answer.
(d) Explain how you can tell that the bbusiness records inventory purchases net of any purchases discouts.

Explanation / Answer

INCOME STATEMENT For the Year Ended Dec 31,2007 Sales $384,000 Less: Sales returns and allowance 4,000 Net sales 380,000 Cost of goods sold 157,630 Gross Profit 222,370 Operating expenses Salaries expense 150,000 Insurance expense 1,500 Rent expense 10,000 Depreciation expense office equip. 4,700 Office supply expense 900 Utility expense 7,000 Purchased discount lost 400 Total operting expense 174,500 Income from operations 47,870 Other revenues and gains 0 47,870 Other expenses and losses 0 Income before income taxes 47,870 Less: Income tax expense 13,900 Net income 33,970 b) Gross Profit margin% =Gross Profit/Sales                                        = 222,370/380,000                                        = 58.52% c) The stores customers seem to be satisfied with their purchases. Out of the 384,000 worth of sales only 4,000 worth of that were sales returns. d) The statement "the business records inventory purchases net of any purchase discount" makes me believe they are referring to a method where by we take the discount off at the time of purchase . That is, rather than taking the discount at the time of payment and crediting it out of inventory. We just take the discount off right from the time of purchase and it never gets recorded at all. It's an assumption that all discounts will get taken. That is, rather than taking the discount at the time of payment and crediting it out of inventory. We just take the discount off right from the time of purchase and it never gets recorded at all. It's an assumption that all discounts will get taken. INCOME STATEMENT For the Year Ended Dec 31,2007 Sales $384,000 Less: Sales returns and allowance 4,000 Net sales 380,000 Cost of goods sold 157,630 Gross Profit 222,370 Operating expenses Salaries expense 150,000 Insurance expense 1,500 Rent expense 10,000 Depreciation expense office equip. 4,700 Office supply expense 900 Utility expense 7,000 Purchased discount lost 400 Total operting expense 174,500 Income from operations 47,870 Other revenues and gains 0 47,870 Other expenses and losses 0 Income before income taxes 47,870 Less: Income tax expense 13,900 Net income 33,970

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.