Chap006 Probs - Chapter 06 - Reporting and Interpreting...

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Chapter 06 - Reporting and Interpreting Sales Revenue, Receivables, and Cash Chapter 06 E6–6. Req. 1 WOLVERINE WORLD WIDE INC. Income Statement For the Year Ended (dollars in thousands) Sales of merchandise $1,220,568 Cost of products sold 734,547 Gross profit 486,021 Selling and administrative expense 345,183 Income from operations 140,838 Other income (expense) Interest expense (2,850) Other income 839 Pretax income 138,827 Income taxes 44,763 Net Income $ 94,064 Earnings per share ($94,064 ÷ 48,888 shares) $1.92 Req. 2 Gross profit margin: $1,220,568 – $734,547 = $486,021 . Gross profit percentage ratio: $486,021 ÷ $1,220,568 = .398 (or 39.8% ). 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 39.8%, which means that $.398 of each net sales dollar was gross profit (alternatively, 39.8% of each sales dollar was gross profit for the period). Wolverine World Wide's gross profit percentage was below Deckers’s current (2008) percentage of 44.3%. Deckers’s 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. 6-1
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Chapter 06 - Reporting and Interpreting Sales Revenue, Receivables, and Cash E6–13. Req. 1 December 31, 2011-Adjusting entry: Bad debt expense (+E, –SE). ........................................ 4,180 Allowance for doubtful accounts (+XA, –A). ....... 4,180 To adjust for estimated bad debt expense for 2011 computed as follows: Aged accounts receivable Estimated percentage uncollectible Estimated amount uncollectible Not yet due $50,000 x 3% = $ 1,500 Up to 180 days past due 14,000 x 12% = 1,680 Over 180 days past due 4,000 x 30% = 1,200 Estimated balance in Allowance for Doubtful Accounts 4,380 Current balance in Allowance for Doubtful Accounts 200 Bad Debt Expense for the year $4,180 Req. 2 Balance sheet: Accounts receivable ($50,000 + $14,000 + $4,000) $68,000 Less allowance for doubtful accounts. ..................... 4,380 Accounts receivable, net of allowance for doubtful accounts. ......................................... $63,620 6-2
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Chapter 06 - Reporting and Interpreting Sales Revenue, Receivables, and Cash E6–16. Req. 1
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This note was uploaded on 03/07/2012 for the course ACCT 225 taught by Professor Canace during the Spring '08 term at South Carolina.

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Chap006 Probs - Chapter 06 - Reporting and Interpreting...

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