Question

JOURNAL ENTRY WORKSHEET

a(1). Record the cash sales of $620,000.

a(2). Record the cost of goods sold of $289,350.

b(1). Record the return by a customer of unsatisfactory merchandise that was in perfect condition. A cash refund of $5,400 was given to the customer.

b(4). Record the merchandise returned by the customer back into inventory. The original cost of the merchandise was $3,500.

c(1). Record the sales on account of $11,400 on terms 2/10, n/30.

c(2). Record the cost of goods sold of $6,840.

d. Record the collection of half of the balance of $5,586 owed by the customer within the discount period.

e. Record the allowance of $1,750 to the customer.

LBS is considering a contract to sell building supplies to a local home builder for $28,000. These materials will cost LBS $20,800. What would be the increase (or decrease) gross profit and gross profit percentage? Gross Profit       by       Gross Profit Percentage to %

Answer 1

Solution 1:

Journal Entries
Event	Particulars	Debit	Credit
a1	Cash Dr	$620,000.00
	To Sales Revenue		$620,000.00
	(Being cash sales recorded)
a2	Cost of goods sold Dr	$289,350.00
	To Inventories		$289,350.00
	(Being goods sold transferred to COGS)
b1	Sales Revenue Dr	$5,400.00
	To Cash		$5,400.00
	(Being merchandise returned by customer)
b4	Inventories Dr	$3,500.00
	To Cost of goods sold		$3,500.00
	(Being goods returned transferred to inventory)
c1	Accounts receivables Dr	$11,400.00
	To Sales Revenue		$11,400.00
	(Being credit sales recorded, terms 2/10, n/30)
c2	Cost of goods sold Dr	$6,840.00
	To Inventories		$6,840.00
	(Being goods sold transferred to COGS)
d	Cash Dr (5586*50%*98%)	$2,737.00
	Sales Discount Dr ($5,586*50%*2%)	$56.00
	To Accounts receivables		$2,793.00
	(Being cash collected from customer within discount period)
e	Sales Discount Dr	$1,750.00
	To Accounts receivables		$1,750.00
	(Being allowance given to customer)

Solution 2:

Increase in gross profit = Sales - COGS = $28,000 - $20,800 = $7,200

Change in gross profit percentage cannot be calculated as earlier gross profit and its percentage is not available.