Question

In: Accounting

On May 31, 2019, Teri Corporation sold spring floral arrangements for $27,000 (on account). Teri paid...

On May 31, 2019, Teri Corporation sold spring floral arrangements for $27,000 (on account). Teri paid $12,000 to acquire the flowers from a wholesaler. Which of the entries will be made on May 31, 2019?

A. Debit Cost of Goods Sold $12,000; Credit Inventory $12,000

B. Debit Cash $27,000; Credit Sales Revenue $27,000

C. Debit Accounts Receivable $27,000; Credit Unearned Revenue $27,000

D. Debit Cost of Goods Sold $12,000; Credit Revenue $27,000

___________________________________________________________________________

Manny Corporation (“Manny”) has the following information from its financial statements and is trying to assess its business.   What are the Days Sales in Inventory (“DSI”), Accounts Receivable Turnover (“ART”) and Accounts Payable Turnover (“APT”) ratios?

Revenue

$450,000

Cost of Goods Sold

$300,000

Operating Expenses

$20,000

Cash

$40,000

Accounts Receivable

$90,000

Inventory

$50,000

Accounts Payable

$50,000

A. DSI = 0.17; ART = 6.0; APT = 5.0

B. DSI = 60.83; ART = 9.0; APT 3.33

C. DSI = 60.83; ART = 5.0; APT = 6.0

D. DSI = 6.083; ART = 9.0; APT = 6.0

___________________________________________________________________________

The following are selected data from Braun Corporation’s year-end financial statements. What is the gross profit margin for Braun Corp.?

Net Income                        $300,000

Sales                                    $900,000

Cost of Goods Sold            $400,000

Operating Income             $325,000

Total Liabilities                   $200,000

A. 33.33%

       B. 28.33%

C. 36.11%

D. 55.56%

Solutions

Expert Solution

Teri corporation

The right option is - " A. Debit Cost of goods sold $12,000; Credit Inventory $12,000".

Whenever goods are sold on account, there are two entries. First for the sale, for this, Accounts receivable is debited with the sale amount and credit goes to sales revenue with sale amount. The second entry is of treating decrease in inventory of finished goods and increasing cost of goods sold. For this the entry is - Debit cost of goods sold by the cost amount and credit inventory by its cost.

The only option satisfying this is "A".

Manny corporation

The right option is - "C. DSI = 60.83; ART = 5.0; APT = 6.0".

Days sales in inventory = ( Inventory / Cost of goods sold ) * 365 days = ($50,000 / $300,000 ) * 365 days= 60.83 days

Accounts receivable turnover = revenue / accounts receivable = $450,000 / $90,000 = 5.0

Accounts payable turnover = cost of goods sold / Accounts payable = $300,000 / $50,000 = 6.0

Braun Corporation

The right option is - "D. 55.56% ".

Gross profit margin = Gross profit / Sales

Where, gross profit margin = sales - cost of goods sold = $900,000 - $400,000 = $500,000

Gross profit margin = Gross profit / Sales = $500,000 / $900,000 = 55.56%.


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