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 $345,350).	$	725,000
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,900).		7,500
c.	Sold merchandise (costing $10,200) to a customer on account with terms n/30.		17,000
d.	Collected half of the balance owed by the customer in (c).		8,500
e.	Granted a partial allowance relating to credit sales the customer in (c) had not yet paid.

1. Compute Net Sales and Gross Profit for LBS.

Net Sales:
Gross Profit:

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 $345,350).	$	725,000
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $4,900).		7,500
c.	Sold merchandise (costing $10,200) to a customer on account with terms n/30.		17,000
d.	Collected half of the balance owed by the customer in (c).		8,500
e.	Granted a partial allowance relating to credit sales the customer in (c) had not yet paid.		2,450

• Record the cash sales of $725,000.
• Record the cost of goods sold of $345,350.
• Record the return by a customer of unsatisfactory merchandise that was in perfect condition. A cash refund of $7,500 was given to the customer.
• Record the merchandise returned by the customer back into inventory. The original cost of the merchandise was $4,900.
• Record the sales on account of $17,000 on terms n/30.
• Record the cost of goods sold of $10,200.
• Record the collection of half of the balance of $8,500 owed by the customer within the discount period.
• Record the allowance of $2,450 granted to the customer.

Answer 1

Answer
			Net sales	Cost	Gross Margin
Ssales for cash			$725,000	$     345,350	$      379,650
Sales for credit			$ 17,000	$       10,200	$          6,800
Less: Sales return			-$    7,500	-$         4,900	-$         2,600
Less: Sales allowance			-$    2,450		-$         2,450
Net amount			$732,050	$     350,650	$      381,400
Net sales: 732050
Gross profit: 381400
Gross Profit Percentage = 381400 /732050 *100 =52.10%
Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
a.	Cash account Dr.				$      725,000
	Sales revenue					$     725,000
	Cost of goods sold Dr.				$      345,350
	Inventory					$     345,350
b.	Sales return and allowance Dr.				$          7,500
	Cash account					$         7,500
	Inventory Account Dr.				$          4,900
	Cost of goods sold					$         4,900
c.	Accounts receivable Dr.				$        17,000
	Sales revenue					$       17,000
	Cost of goods sold Dr.				$        10,200
	Inventory					$       10,200
d.	Cash account Dr.				$          8,500
	Accounts receivable					$         8,500
e.	Sales return and allowance Dr.				$          2,450
	Accounts receivable					$         2,450