Question

Hair Care Inc. is a wholesaler of hair supplies. Hair Care uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

a.	Sold merchandise for cash (cost of merchandise $29,197)	$	51,600
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $400)		640
c.	Sold merchandise (costing $4,950) to a customer, on account with terms 3/10, n/30		10,000
d.	Collected half of the balance owed by the customer in (c) within the discount period		4,850
e.	Granted an allowance to the customer in (c)		180

1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.

3. 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. Hair Care is considering a contract to sell merchandise to a hair salon chain for $15,400. This merchandise will cost Hair Care $10,000.

(a) Compute the new gross profit percentage. (

Answer 1

Hair Care
Workings for 1	Sales	Cost of merchandise sold	Note
Event a	51,600.00	29,197.00
Event b	(640.00)	(400.00)
Event c	10,000.00	4,950.00
Event d	(150.00)	-	This is $ 10,000/2*3%
Event e	(180.00)	-
Net Sales	60,630.00	33,747.00

Answer 1	Amount $
Event a	51,600.00
Event c	10,000.00
Sales Revenue	61,600.00
Answer 1	Amount $
Net Sales	60,630.00
Less: Cost of merchandise sold	33,747.00
Gross Profit	26,883.00
Gross Profit %	44.34%

	Answer 3
Event	Account	Debit $	Credit $
a	Cash	51,600.00
	Sales		51,600.00
a	Cost of merchandise sold	29,197.00
	Inventory		29,197.00
b	Sales returns and allowance	640.00
	Accounts Receivable		640.00
b	Inventory	400.00
	Cost of merchandise sold		400.00
c	Accounts Receivable	10,000.00
	Sales		10,000.00
c	Cost of merchandise sold	4,950.00
	Inventory		4,950.00
d	Cash	4,850.00
	Sales discount	150.00
	Accounts Receivable		5,000.00
e	Sales returns and allowance	180.00
	Accounts Receivable		180.00

Answer 4	Sales	Cost of merchandise sold
Total- present situation	60,630.00	33,747.00
Sales value	15,400.00	10,000.00
Total	76,030.00	43,747.00
Gross Profit	32,283.00
Increased by	5,400.00
Gross Profit %	42.46%
Decreased by	-1.88%