Chapter_7_-_Class_Discussion_Solutions_Libby_4th_edition

Chapter_7_-_Class_Discussion_Solutions_Libby_4th_edition -...

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EXERCISES E7–4 Req. 1 Sales revenue ($800 + $5,000 + $6,000). ............................................. $11,800 Less: Sales returns and allowances ( 1 / 10 x $6,000 from David). ........... (600) Less: Sales discounts ( 9 / 10 x $6,000 from David x 2%). ....................... (108) Less: Credit card discounts ($800 from Brigitte x 2%). ....................... (16 ) Net sales. ............................................................................................... $11,076 Req. 2 Nov. 20 Cash (+A) ($800 x 98%). ........................................................ 784 Credit card discount (+XR - SE) ($800 x 2%). .................... 16 Sales revenue (+R +SE). .............................................. 800 Nov. 25 Trade receivables – Clara (+A) . ............................................. 5,000 Sales revenue (+R +SE). .............................................. 5,000 Dec. 30 Cash (+A). ............................................................................... 5,000 Trade receivables – Clara (–A). ....................................... 5,000 E7–5 Profit from Transaction Net Sales Gross Profit Operations July 12 + + + July 15 + + + July 20 NE NE July 21
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E7–7 Req. 1 SLATE, INC. Income Statement For the Year Ended December 31, 2011 Amount Gross sales ($220,000 + $32,000). ............................ $252,000 Less sales returns and allowances. ............................. 7,000 Net sales revenue. ...................................................... 245,000 Cost of sales. .............................................................. 147,000 Gross margin on sales. ............................................... 98,000 Operating expenses: Administrative expense. ........................................... $19,000 Selling expense. ....................................................... 40,200 Bad debt expense ($32,000 x 2.5%). ....................... 800 60,000 Profit before income tax. ............................................ 38,000 Income tax expense ($38,000 x 30%). ..................... 11,400 Profit. ......................................................................... $ 26,600 Earnings per share ($26,600 ÷ 5,000 shares) $5.32 In this case Profit from operations is the same as Profit before income tax. Req. 2 Gross profit (gross margin): $245,000 – $147,000 = $98,000 . Gross profit percentage = $98,000 ÷ $245,000 = .40 (or 40%). Gross profit (or gross margin) 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 sales. The gross profit ratio is the amount of each net sales dollar that was gross profit during the period. For this
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This note was uploaded on 12/29/2011 for the course MANAGEMENT MGTB05 taught by Professor Georgequanfun during the Fall '11 term at University of Toronto.

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Chapter_7_-_Class_Discussion_Solutions_Libby_4th_edition -...

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