Question

Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a.	Sold merchandise for cash (cost of merchandise $337,350).	$	710,000
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,700).		7,200
c.	Sold merchandise (costing $9,720) to a customer on account with terms n/30.		16,200
d.	Collected half of the balance owed by the customer in (c).		8,100
e.	Granted a partial allowance relating to credit sales the customer in (c) had not yet paid.		2,350

Required:

1. Compute Net Sales and Gross Profit for LBS.

2. Compute the gross profit percentage. (Round your answer to 1 decimal place.)

3. Required information

[The following information applies to the questions displayed below.]

Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a.	Sold merchandise for cash (cost of merchandise $337,350).	$	710,000
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,700).		7,200
c.	Sold merchandise (costing $9,720) to a customer on account with terms n/30.		16,200
d.	Collected half of the balance owed by the customer in (c).		8,100
e.	Granted a partial allowance relating to credit sales the customer in (c) had not yet paid.		2,350

Prepare journal entries to record transactions (a)–(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

4.

Required information

[The following information applies to the questions displayed below.]

Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a.	Sold merchandise for cash (cost of merchandise $337,350).	$	710,000
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,700).		7,200
c.	Sold merchandise (costing $9,720) to a customer on account with terms n/30.		16,200
d.	Collected half of the balance owed by the customer in (c).		8,100
e.	Granted a partial allowance relating to credit sales the customer in (c) had not yet paid.		2,350

LBS is considering a contract to sell building supplies to a local home builder for $34,000. These materials will cost LBS $24,400. Would this contract increase (or decrease) LBS’s dollars of gross profit and its gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)

Answer 1

			Net sales	Cost	Gross Margin
Ssales for cash			710000	337350	372650
Sales for credit			16200	9720	6480
Less: Sales return			-7200	-4700	-2500
Less: Sales allowance			-2350		-2350
Net amount			716650	342370	374280
Net sales: 716650
Gross profit: 374280
Gross Profit Percentage = 374280 /716650 *100 =52.23%
Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
a.	Cash account Dr.				710000
	Sales revenue					710000
	Cost of goods sold Dr.				337350
	Inventory					337350
b.	Sales return and allowance Dr.				7200
	Cash account					7200
	Inventory Account Dr.				4700
	Cost of goods sold					4700
c.	Accounts receivable Dr.				16200
	Sales revenue					16200
	Cost of goods sold Dr.				9720
	Inventory					9720
d.	Cash account Dr.				8100
	Accounts receivable					8100
e.	Sales return and allowance Dr.				2350
	Accounts receivable					2350
Gross profit increase for additional sales =34000-24400 = 9600
Revised Gross Profit = 374280+9600 = 383880
Revised sales = 716650+34000 =750650
Gross profit rate = 383880/750650 *100 =51.14%
Gross profit increased by $ 9600
Gross profit rate decrease to 51.14%