Compute Sales Revenue, Net Sales and Gross Profit based off of the following inf

ID: 2548473 • Letter: C

Question

Compute Sales Revenue, Net Sales and Gross Profit based off of the following information:

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:

Received merchandise returned by customers as unsatisfactory (but in perfect condition)
for cash refund (original cost of merchandise $3,500).

5,400

a. Sold merchandise for cash (cost of merchandise $289,350). $ 620,000 b.

Received merchandise returned by customers as unsatisfactory (but in perfect condition)
for cash refund (original cost of merchandise $3,500).

5,400

c. Sold merchandise (costing $6,840) to a customer on account with terms 2/10, n/30. 11,400 d. Collected half of the balance owed by the customer in (c) within the discount period. 5,586 e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid. 1,750

Explanation / Answer

Answer:

First of all we need to find out the net sales as under

Net Sales = Cash sales + credit sales-return-allowance-discounts

Now we will make the calculation table as under

Sales

Cash Sales

620,000

Credit Sales

11400

Total Sales

631,400

less:

Returns

-5400

Discounts(11400/2)*2%

-114

Allowance

-1750

Net sales

624,136

Now find gross profit as under

Gross profit

=Net Sales- cost of sales

=624,136- ((289350-3500)+6840 )

=331,446

Gross profit= $331,446