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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
This entry is booked to show the inventory being received back and ready for re-sale:
Cost of Goods Sold
Credit card discounts
Sales returns and allowances
= Net Sales
= 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)
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
• Periodic: Inventory reco...
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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.
- Spring '08
- Financial Accounting