Chapter 6 - Student Name Class Problem 06-01 CLAYPOOL HARDWARE General Journal Account Titles Nov 5 Accounts Receivable(Bemidji Construction Sales

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Student Name: Class: Problem 06-01 CLAYPOOL HARDWARE General Journal Account Titles Debit Credit Nov. 5 Accounts Receivable (Bemidji Construction ) 13,390 Sales 13,390 «- Correct! 5 Cost of Goods Sold 9,105 Inventory 9,105 «- Correct! 9 Inventory 3,800 Accounts Payable (Owatonna Tool Company) 3,800 «- Correct! Dec. 5 Cash 13,390 Accounts Receivable (Bemidji Construction ) 13,390 «- Correct! 9 Accounts Payable (Owatonna Tool Company) 3,800 Cash 3,800 «- Correct! 31 Cost of Goods Sold 1,710 Inventory 1,710 «- Correct! CLAYPOOL HARDWARE Partial Income Statement For the Year Ended December 31, 20__ Net sales $1,024,900 Cost of goods sold 696,932 Gross profit $327,968 ^ Correct!
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Student Name: Class: Problem 06-01 c. Is Claypool able to pass its extra transportation costs on to its customers? Does the business appear to suffer or benefit financially from its remote location? Explain your reasoning and support your conclusions with specific accounting data comparing the operations of Claypool Hardware with the industry averages. Claypool Industry Hardware Average Difference Annual sales $1,024,900 $1,000,000 $24,900 Gross profit 327,968 250,000 $77,968 Gross profit rate 32% 25% 7% ^ Correct! ^ Correct! ^ Correct! Claypool spends approximately $20,000 on transportation costs annually. Yet, it generates approximately $25,000 more in annual sales than the industry average. The company's gross profit rate also exceeds the industry average by 7%. Becuase Claypool Hardware is the only hardware store in this remote area it benefits from its remote location by not having competition. Claypool is able to pass its extra transportation costs onto its customers. However, consumers may rely on Claypool due to its convient location and the fact that it does not charge transportation costs. If Claypool increased its prices by approximately 2% to cover transporation costs, consumers may
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This note was uploaded on 07/15/2010 for the course ACC ACC50 taught by Professor Smith during the Summer '10 term at Rutgers.

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Chapter 6 - Student Name Class Problem 06-01 CLAYPOOL HARDWARE General Journal Account Titles Nov 5 Accounts Receivable(Bemidji Construction Sales

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