Assume the cost of the inventory item was 20 this

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ompany (undamaged). Assume the cost of the inventory item was $20. This entry is booked to show the return and to credit the customer's account: Sales Returns and Allowances $50 Accounts Receivable $50 This entry is booked to show the inventory being received back and ready for re-sale: Inventory $20 Cost of Goods Sold $20 Gross Sales Credit card discounts Sales discounts Sales returns and allowances = Net Sales - COGS = Gross Profit/Gross Margin Selling, General, and Admin. Expenses = Operating Income +- Other items (Interest income or exoense. Other gains or losses) = Income before taxes Income tax expense (for corporations) = Net income from continuing operations +- Discontinued Operations (if company has these) +- Extraordinary items (if comoanv has these) Net income Gross Profit Percentage: Computed to determine how effective a company is with selling its goods for more than its cost. Gross Profit Percentage = Gross Profit $/Net Sales 39 Perpetual vs. Periodic Inventory Systems: • Perpetual: Inventory records are always kept up to date; maintained on a transaction by transaction basis; used to be difficult but much easier now with technology (bar coding, RFID tags, etc) • Periodic: Inventory reco...
View Full Document

This note was uploaded on 01/22/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

Ask a homework question - tutors are online