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Warren SM_Ch.06_final

# Warren SM_Ch.06_final - CHAPTER 6 115 EXERCISES Ex 61 a...

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CHAPTER 6 115 115

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EXERCISES Ex. 6–1 a. \$318,000 (\$795,000 – \$477,000) b. 40% (\$318,000 ÷ \$795,000) c. No. If operating expenses are less than gross profit, there will be a net in- come. On the other hand, if operating expenses exceed gross profit, there will be a net loss. Ex. 6–4 a. Cost of merchandise sold: Merchandise inventory, December 1, 2009 \$ 210,000 Purchases \$1,400,000 Less: Purchases returns and allowances \$20,000 Purchases dis- counts 18,500 38,500 Net purchases \$1,361,500 Add freight in 14,100 Cost of merchandise pur- chased 1,375,600 Merchandise available for sale \$1,585,600 Less merchandise inventory, Novem- ber 30, 2010 185,000 Cost of merchandise sold \$1,400,600 b. \$849,400 (\$2,250,000 – \$1,400,600) 116 116
Ex. 6–7 a. Selling expense, (1), (2), (7), (8) b. Administrative expense, (3), (5), (6) c. Other expense, (4) 117 117

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Ex. 6–10 a. \$15,000 (\$250,000 – \$10,000 – \$225,000) b. \$135,000 (\$225,000 – \$90,000) c. \$552,000 (\$600,000 – \$30,000 – \$18,000) d. \$222,000 (\$552,000 – \$330,000) e. \$50,000 (\$1,000,000 – \$40,000 – \$910,000) f. \$623,500 (\$910,000 – \$286,500) g. \$539,000 (\$520,000 + \$11,500 + \$7,500) h. \$520,000 (\$400,000 + \$120,000) Ex. 6–17 a. \$12,500 b. \$12,900 c. \$125 (\$12,500 × 1%) d. \$12,775 (\$12,900 – \$125) Ex. 6–24 a. At the time of sale b. \$13,750 c. \$14,850 [\$13,750 + (\$13,750 × 8%)] d. Sales Tax Payable 118 118
PROBLEMS Prob. 6–1A 1. CASE-IT CO. Income Statement For the Year Ended November 30, 2010 Revenue from sales: Sales \$2,703,600 Less: Sales returns and allow- ances \$ 37,800 Sales discounts 19,800 57,600 Net sales \$2,646,000 Cost of merchandise sold 1,926,000 Gross profit \$ 720,000 Expenses: Selling expenses: Sales salaries expense \$378,000 Advertising expense 50,900 Depreciation expense—store equipment 8,300 Miscellaneous selling expense 2,000 Total selling expenses \$ 439,200 Administrative expenses: Office salaries expense \$ 73,800 Rent expense 39,900 Insurance expense 22,950 Depreciation expense—office equipment 16,200 Office supplies expense 1,650 Miscellaneous administrative expense 1,900 119 119

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Total admin- istrative expenses 156,400 Total ex- penses 595,600 Income from operations \$ 124,400 Other expense: Interest expense 4,400 Net income \$ 120,000 120 120
Prob. 6–1A Continued 2.

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