Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual
ID: 2538182 • Letter: L
Question
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:
a. Sold merchandise for cash (cost of merchandise $313,350). $ 665,000
b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,100). 6,300
c. Sold merchandise (costing $8,280) to a customer on account with terms 2/10, n/30. 13,800
d. Collected half of the balance owed by the customer in (c) within the discount period. 6,762
e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid. 2,050
Compute Sales Revenue, Net Sales, and Gross Profit for LBS
Compute the gross profit percentage. (Round your answer to 1 decimal place.)
Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
LBS is considering a contract to sell building supplies to a local home builder for $31,000. These materials will cost LBS $22,600. What would be the increase (or decrease) gross profit and gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)
Required: 1.Compute Sales Revenue, Net Sales, and Gross Profit for LBS
2.Compute the gross profit percentage. (Round your answer to 1 decimal place.)
3.Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
4.LBS is considering a contract to sell building supplies to a local home builder for $31,000. These materials will cost LBS $22,600. What would be the increase (or decrease) gross profit and gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)
Explanation / Answer
Answer: Requirement 1 Computaion of Sales Revenue, Net sales and Gross profit Sales Revenue $ 678,800.00 ($665000+13800) Less: Sales return and allowance $ 8,350.00 ($6300+2050) Sales discount $ 138.00 $ 8,488.00 ($13800/2-6762) Net Sales $ 670,312.00 Less: Cost of goods sold $ 317,530.00 ($313350-4100+8280) Gross Profit $ 352,782.00 Requirement 2 Gross profit percent =Gross profit/Net sales *100 =$352,782/670,312*100 52.0% Requirement 3 Journal Entry Date Account title and explanation Debit Credit a Cash $ 665,000.00 Sales $ 665,000.00 a Cost of goods sold $ 313,350.00 Inventory $ 313,350.00 (To record sale of goods ) b Sales return and allowance $ 6,300.00 Cash $ 6,300.00 b Inventory $ 4,100.00 Cost of goods sold $ 4,100.00 (To record sales return) c Accounts receivable $ 13,800.00 Sales $ 13,800.00 c Cost of goods sold $ 8,280.00 Inventory $ 8,280.00 (To record sale of goods ) d Cash $ 6,762.00 Sales Discount $ 138.00 (6900-6762) Accounts receivable $ 6,900.00 ($13,800/2) e Sales return and allowance $ 2,050.00 Accounts receivable $ 2,050.00 Requirment 4 Incremental Revenue $ 31,000.00 Less: Incremental Cost $ 22,600.00 Increase in Gross profit $ 8,400.00 New Gross profit percent 51.5% Decrease in Gross profit percent -0.5% (51.5%-52%)
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