Chapter 6 HW - Student Name: Ankita Shah Class: Financial...

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Student Name: Ankita Shah Class: Financial Accounting Problem 06-02 HENDRY'S BOUTIQUE Income Statement December 31, 2007 Sales $226,000 Less: Sales returns and allowances (2,500) 1% Net sales 223,500 Cost of goods sold 100,575 45% Gross profit 122,925 Other expense: Purchase discounts lost $250 Utilities expense 4,120 Office supply expense 520 Depreciation expense: office equipment 2,750 Rent expense 6,100 Insurance expense 900 Salaries expense 88,095 102,735 Income before income taxes expense 20,190 Income taxes expense 8,190 Net income $12,000 5% b. Gross profit margin as percentage of net sales Gross profit 122,925 Net sales 223,500 Gross profit margin 55% c. Do the store's customers seem to be satisfied with their purchases? Defend your answer. d. Explain how you can tell that the business records inventory purchases net of any purchase discounts. From the information provided above it shows that at least 99% of the boutique customers are happy with their purchases. The the sales return & allowance is approx. 1% of the gross sales. Furthermore, the net income is only 5% of net sales, which shows commitment of the boutique towards it's customers, by providing better products and services, instead of just trying to meet the bottom line. The income statement shows an expense of $250 in the Purchase Discount lost
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This note was uploaded on 12/13/2009 for the course ACCOUNTING ACCTG 50 taught by Professor B during the Fall '09 term at University of Phoenix.

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Chapter 6 HW - Student Name: Ankita Shah Class: Financial...

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