[The following information applies to the questions displayed below.] Larry’s Bu

Question

[The following information applies to the questions displayed below.]

Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

$560,000 a. Sold merchandise for cash (cost of merchandise $257,350). b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $2,700). C. Sold merchandise (costing $4,920) 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. e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid. 4,200 8,200 4,018 1,350

Explanation / Answer

Answer 1. Sales Revenue    568,200.00    568,200.00 Sales Return      (4,200.00) Sales Discount            (82.00)      (4,282.00) Net sales    563,918.00 Cost of Goods Sold    259,570.00 Gross Profit    304,348.00 Answer 2. Gross Profit Percentage = Gross Profit / Net Sales Gross Profit Percentage = $304,348 / $563,918 Gross Profit Percentage = 53.97% (Approx.) Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. a-1. Cash    560,000.00 Sales    560,000.00 (To record the sales) a-2. Cost of Goods Sold    257,350.00 Inventory    257,350.00 (To record the cost of goods sold) b-1. Sales Return & Allowances        4,200.00 Cash        4,200.00 (To record the sales return) b-2. Inventory        2,700.00    Cost of Goods Sold        2,700.00 (To record sales return -COGS) c-1. Accounts Receivable        8,200.00 Sales        8,200.00 (To record the sales) c-2. Cost of Goods Sold        4,920.00 Inventory        4,920.00 (To record the cost of goods sold) d. Cash        4,018.00 Sales Discount              82.00    Accounts Receivable        4,100.00 (To record the cash received) e. Allowance for Doubtful Account        1,350.00    Accounts Receivable        1,350.00 (To record the amount written off) Answer 4. Gross Profit increased by    5,600.00 Gross Profit percentage 53.97% to 52.72%

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