Question

Required information (The following information applies to the questions displayed below) 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 $785, eee . Sold merchandise for cash (cost of merchandise $577,350). b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $5,708). c. Sold merchandise (costing $12,120) to a customer on account with terms n/30. d. Collected half of the balance owed by the customer in (0) e. Granted a partial allowance relating to credit sales the customer in (c) had not yet poid. 8,700 20,209 10.100 2,858

Answer 1

Sales revenue is recognized as and when the sales are made. To compute net sales, all the returns and allowances need to be deducted.

Sales revenue (785,000 + 20,200)	805,200
Less : sales return and allowance ( 2850 + 8700)	11,550
Net Sales	793,650

Hence net sales = $ 793,650

Gross profit is computed by deducting cost of goods sold from the sales made.

Net Sales	793,650
Less : cost of goods sold ( 377,350 – 5700 + 12120)	383,770
Gross profit	409,880

Hence, required gross profit = $ 409,880

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