Question
In: Accounting
Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system....
Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:
| a. | Sold merchandise for cash (cost of merchandise $46,797). | $ | 87,200 | |
| b. | Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $630 ). | 1,050 | ||
| c. | Sold merchandise (costing $9,025 ) to a customer on account with terms n/60. | 19,000 | ||
| d. | Collected half of the balance owed by the customer in (c). | 9,500 | ||
| e. | Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. | 304 | ||
Required:
a. Compute Net Sales and Gross Profit for Hair World
b. Compute the gross profit percentage. (Round your answer to 1 decimal place.)
c. Prepare journal entries to record transactions (a)–(e)
d. Hair World is considering a contract to sell merchandise to a hair salon chain for $24,000. This merchandise will cost Hair World $14,320. What would be the increase (or decrease) to Hair World’s gross profit and gross profit percentage? (Round "Gross Profit Percentage" to 1 decimal place.)
| Gross Profit | by | ________ | |
| Gross Profit Percentage | to | ________% |
Solutions
Expert Solution
| Sold merchandise for cash | 87,200 | |
| Sold merchandise on credit | 19,000 | |
| less: Received merchandise returned by customers |
|
|
| less: Granted a partial allowance | 304 | |
| Net sale | 104,846 |
| Net sale | 104,846 |
| less: cost of Sold merchandise for cash | 46,797 |
| less: cost of Sold merchandise on credit | 9,025 |
| Gross Profit | 49,024 |
gross profit percentage = gross profit / sale x 100
= 49,024 / 104,846 x 100
= 46.75%
| No. | Account | Debit | Credit |
| a | Cash | 87,200 | |
| Sales Revenue | 87,200 | ||
| b | Sales Return | 1,050 | |
| Cash | 1,050 | ||
| c | Account receivable | 19,000 | |
| Sales revenue | 19,000 | ||
| d | Cash | 9,500 | |
| Account receivable | 9,500 | ||
| e | Sales allowance | 304 | |
| Account Receivable | 304 |
| Net sale | 104,846 |
| Add: sale to hair salon chain | 24,000 |
| less: cost of Sold merchandise for cash | 46,797 |
| less: cost of sale to hair salon chain | 14,320 |
| less: cost of Sold merchandise on credit | 9,025 |
| Gross Profit | 58,704 |
gross profit percentage = gross profit / sale x 100
= 58,704 / 128,846 x 100
= 45.56%
hair world's gross profit is increased but gross profit percentage is decreased.
ekkarill92 answered 1 year agoRelated Solutions
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