Chapter 6 Accounting for Merchandising Businesses 341 CP 6-3 Team Activity In te

Question

Chapter 6 Accounting for Merchandising Businesses 341 CP 6-3 Team Activity In teams, select a public company that interests you. tain the company's most recent annual report on Form 10-K·The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financial statements and accompanying notes. The Form 10-K can be obtained either (a) from the investor relations section of the company's website or (b) by using the company search feature of the SECS EDGAR database service found at www.secgon/edgar/scarchedgar/ companysearch html. 1. Based on the information in the company's most recent annual report, determine each of the following for all the years presented a. Gross profit b. Gross profit rate (Gross profit ÷ Sales) C Income from operations d. Percentage change in income from operations e. Net income f. Percentage change in net income 2 Based solely on your responses to item 1, has the company's performance improved, remained constant, or deteriorated over the periods presentedP Briefly explain your answer Suzi Nomro operates Watercraft Supply Company, an online boat parts distributorship that is in its third year of operation. The following income statement was prepared for the year ended October 31, 2019. on Income Statement For the Year Ended October 31, 2019 Revenues Sales $1,350,000 Total revenues 1,365.000 Cost of merchandse sold... Selling expenses 810,000 140,000 90,000 Interest expense. Total expenses... Suzi is considering a proposal to increase net income by offering sales discounts of 2/15, n/30 and by shipping all merchandise FOB shipping point. Currently, no sales dis- counts are allowed and merchandise is shipped FOB destination. It is estimated that the new terms will increase sales by 10%. The ratio of the cost of merchandise sold to sales is expected to be 60%All selling and administrative expenses are expected to remain unchanged, except for store supplies and miscellaneous selling expenses, which are ex pected to increase proportionately with increased sales. The amounts of these items for the year ended October 31, 2019, were as follows 12000 6,000 Store supplies expense The interest revenue and expense items will remain unchanged. The shipment of all merchandise FOB shipping point will eliminate all delivery expenses, which for the year ended October 31, 2019, were $12,000.

Explanation / Answer

Suzi Nomoro

Sub: Proposed change in the sales policy of the company.

With reference to the proposed change in the sales policy of the company , I would like to state that the proposal will result in higher net income for the company of $355,566 as compared to the current net income of $321,000.

The detailed working of the net income is attched herewith for your information.

Under the proposed policy, the net sales revenue will be $1,455,300 in comparison to the present sales of $1,350,000 showing an increase of $105,300.

Correspondingly the total expenses will be $1,114,734 in comparison to the present total expenses of $1,044,000 showing an increase of $70,734.

The resulting increase in net income is $34,566.

9Name)

WATERCRAFT SUPPLY COMPANY

9Name)

WATERCRAFT SUPPLY COMPANY

Estimated Income statement for the year ended October 31, 2020 Revenues: Sales 1485000 Less: discounts 29700 Net Sales 1455300 Interest 15000    Total Revenues 1470300 Expenses:    Cost of merchandise sold 891000    Selling Expenses ** 128534    Administrative Expenses **** 91200    Interest expense 4000    Total Expenses 1114734 Net income 355566 Working: Current Selling Expenses 140000 Less: Deivery expenses 12000            Misc.selling expenses 6000 122000 Add: Revised misc.selling expenses * 6534 Revised selling expenses ** 128534 Current admn. Expenses 90000 Less: Stores supplies expense 12000 78000 Add: Revised stores supplies expense *** 13200 Revised administrative expenses **** 91200 Current misc. selling expenses 6000 Current sales 1350000 Misc.Selling expenses as % of sales 0.44% Revised Sales 1485000 Revised misc.selling expenses * 6534 Current stores supplies expense 12000 Current sales 1350000 Misc.Selling expenses as % of sales 0.89% Revised Sales 1485000 Revised stores supplies expense *** 13200

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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