Campus Stop, Inc., is a student co-op. Campus Stop uses a perpetual inventory sy

Question

Campus Stop, Inc., is a student co-op. Campus Stop uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: $285,500 a. Sold merchandise for cash (cost of merchandise $156,67O). b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $870). c. Sold merchandise (costing $11,250) to a customer on account with terms 2/10, n/30. d. Collected half of the balance owed by the customer in (c) within the discount period. 1,670 25,000 12,250 e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid.1,900

Explanation / Answer

Answer to Question 1.

Sales Revenue = $285,500 + $25,000
Sales Revenue = $310,500

Net Sales = Sales Revenue – Sales Return and Allowances – Sales Discount
Sales Return and Allowances = $1,670 + $1,900
Sales Return and Allowances = $3,570

Sales Discount = $25,000 * ½ * 2% = $250

Net Sales = $310,500 - $3,570 - $250
Net Sales = $306,680

Cost of Goods Sold = $156,670 - $870 + $11,250
Cost of Goods Sold = $167,050

Gross Profit = Net Sales – Cost of Goods Sold
Gross Profit = $306,680 - $167,050
Gross Profit = $139,630

Answer to Question 2.

Gross Profit Percent = Gross Profit / Net Sales * 100
Gross Profit Percent = 139,630 / 306,680* 100
Gross Profit Percent = 45.53%

Answer to Question 3.

Gross Profit on Contract = $20,000 - $13,700
Gross Profit on Contract = $6,300

Gross Profit will be increased by $6,300.

Proposed Net Sales = $306,680 + $20,000 = $326,680
Proposed Gross Profit = $139,630 + $6,300 = $145,930

Proposed Gross Profit percent= 145,930 / 326,680 * 100
Proposed Gross Profit percent= 44.67%

Gross Profit percentage increased to 44.67%

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