Question

1.Abbey Co. sold merchandise to Gomez Co. on account, $33,000, terms 2/15, net 45. The cost of the merchandise sold was $13,700. Abbey Co. issued a credit memo for $3,200 for merchandise returned that originally cost $1,500. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

2.Using the following information, what is the amount of net income? Purchases $ 29,425 Selling expenses $ 751 Merchandise inventory, September 1 7,238 Merchandise inventory, September 30 8,277 Administrative expenses 604 Sales 53,207 Rent revenue 1,161 Interest expense 981

3.Using the following information, what is the amount of gross profit? Purchases $ 27,649 Selling expenses $ 894 Merchandise inventory, September 1 6,036 Merchandise inventory, September 30 10,317 Administrative expenses 839 Sales 45,459 Rent revenue 1,133 Interest expense 828

Answer 1

Answer:

1.Computation of Gross profit eared by Abbey Co.

    Particulars                                    Amount($)                                   Amount($)

   Gross Sales                                  33000

Less: Sales returns                            3200

Less: Sales Discount                           596  

          ($29800*2%)                                                                                29204

Less: Cost of Goods sold                                                                      13700

          Gross Profit                                                                                 15504

2. Computation of Net income

        Particulars                                                                               Amount($)

        Sales                                                                                       53207

Less: Cost of goods sold                                                                 28386

       ($7238+$29425-$8277)

          Gross profit                                                                            24821

Less: Selling expenses                                                                        751

          Administrative expenses                                                            604

          Interest expense                                                                         981

Add : Rent revenue                                                                            1161

       Net Income                                                                                23646

3. Calculation of Gross Profit

      Particulars                                                       Amount($)

      Sales                                                                   45459

Less: Cost of Goods sold                                         23368

   ($6036+$27649-$10317)

      Gross Profit                                                       22091