Question

Problem 5-1A

Winters Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Winters’ ledger showed Cash of $11,200 and Common Stock of $11,200. May 1 Purchased merchandise on account from Black Wholesale Supply for $7,900, terms 1/10, n/30. 2 Sold merchandise on account for $4,800, terms 2/10, n/30. The cost of the merchandise sold was $3,600. 5 Received credit from Black Wholesale Supply for merchandise returned $300. 9 Received collections in full, less discounts, from customers billed on May 2. 10 Paid Black Wholesale Supply in full, less discount. 11 Purchased supplies for cash $1,260. 12 Purchased merchandise for cash $4,340. 15 Received $322 refund for return of poor-quality merchandise from supplier on cash purchase. 17 Purchased merchandise from Wilhelm Distributors for $2,750, terms 2/10, n/30. 19 Paid freight on May 17 purchase $350. 24 Sold merchandise for cash $7,700. The cost of the merchandise sold was $5,740. 25 Purchased merchandise from Clasps Inc. for $1,120, terms 3/10, n/30. 27 Paid Wilhelm Distributors in full, less discount. 29 Made refunds to cash customers for returned merchandise $135. The returned merchandise had cost $90. 31 Sold merchandise on account for $1,792, terms n/30. The cost of the merchandise sold was $1,162.

Journalize the transactions using a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Post the transactions to T-accounts. Be sure to enter the beginning cash and common stock balances. (Post entries in the order of journal entries posted in part (a). Round answers to 0 decimal places, e.g. 5,275.)

Prepare an income statement through gross profit for the month of May 2017. (Round answers to 0 decimal places, e.g. 5,275.)

Calculate the profit margin and the gross profit rate. (Assume operating expenses were $1,960.) (Round answers to 1 decimal place, e.g. 15.5%.) Profit margin enter percentages rounded to 1 decimal place % Gross profit rate enter percentages rounded to 1 decimal place %

Answer 1

Answer -

Working :

	Net sales revenue
	Gross sales	Sales return and allowance	sales discount	cost of goods sold
mAY 2	4800			3600
may 9			4800*.02=96
may 24	7700			5740
may 29		135		(90)
may 31	1792			1162
Total	14292	135	96	10412

3)

WINTERS HARDWARE STORE Income statement (partial) for the month ended may 31 2017
Revenue
Sales revenue	14292
less:
sales return and allowance	135
Sales discount	96
		(231)
Net sales revenue		14061
less:cost of good sold		(10412)
Gross margin		3649

4)

Gross profit rate =Gross profit / net sales revenue

                 = 3649/14061

                = .2595 or 25.95%   [rounded to 26%]

Profit margin =[Gross profit -operating expense]/net sales revenue

             = [3649-1960]/14061

             = 1689/14061

=0.1201(12.01%)

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