unit_04_key - Solutions to Suggested Exercises &...

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E6–2. Sales revenue ($1,000 + $5,000 +$3,000). ................................ $9,000 Less: Sales returns and allowances ($1,000 from T). ............... 1,000 Less: Sales discounts ($5,000 collected from S x 3%). ............ 150 Less: Credit card discounts ($1,000 from R x 2%). ................... 20 Net sales. .................................................................................... $7,830 E6–4. Cost of Transaction Net Sales Goods Sold Gross Profit July 12 + 297 + 200 + 97 July 15 + 5,000 + 3,000 + 2,000 July 20 – 150 NE – 150 July 21 – 1,000 – 600 – 400 E6–6. Req. 1 WOLVERINE WORLD WIDE INC. Income Statement For the Year Ended Amount Percentage Sales of merchandise $888,926 100.0% Cost of products sold 562,338 63.3% Gross profit 326,588 36.7% Selling and administrative expense 246,652 27.7% Income from operations 79,936 9.0% Other income (expense) Interest expense (5,474) 0.6% Other income 686 0.1% Pretax income 75,148 8.5% Income taxes 23,262 2.6% Net Income $ 51,886 5.8% Earnings per share ($51,886 ÷ 40,721 shares) $1.27
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Req. 2 Gross profit margin: $888,926 – $562,338 = $326,588 . Gross profit percentage ratio: $326,588 ÷ $888,926 = .367 (or 36.7% ). Gross margin or gross profit in dollars is the difference between the sales prices and the costs of purchasing or manufacturing all goods that were sold during the period (sometimes called the markup); that is, net revenue minus only one of the expenses--cost of goods sold. The gross profit ratio is the amount of each net sales dollar that was gross profit during the period. For this company, the rate was 36.7%, which means that $.367 of each net sales dollar was gross profit (alternatively, 36.7% of each sales dollar was gross profit for the period). Wolverine World Wide's gross profit percentage was below Deckers’ current (2003) percentage of 42.4%. Deckers’ shoes have a reputation as a rugged product as well as a premium "high fashion" product. This has allowed it to maintain higher prices and higher gross margins. In marketing this is called the value of brand equity. Wolverine World Wide has been investing in its own brand development program, and has increased its gross profit percentage by over 2% in the last two years. E6–8. (a) Bad debt expense (+E, –SE) ($650,000 x 0.02). ....... 13,000 Allowance for doubtful accounts (+XA, –A). ....... 13,000 To record estimated bad debt expense. (b) Allowance for doubtful accounts (–XA, +A) . .............. 1,000 Accounts receivable (–A). .................................. 1,000 To write off a specific bad debt. E6–12. Aged accounts receivable Estimated percentage uncollectible Estimated amount uncollectible Not yet due $12,000 x 2% = $ 240 Up to 120 days past due 5,000 x 10% = 500 Over 120 days past due 3,000 x 30% = 900 Estimated balance in Allowance for Doubtful Accounts 1,640 Current balance in Allowance for Doubtful Accounts 300 Bad Debt Expense for the year $1,340
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E6–15. 1.
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unit_04_key - Solutions to Suggested Exercises &...

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