Question

Required information CP6-3 Recording Cash Sales, Credit Sales, Sales Returns, and Sales Allowances and Analyzing Gross Profit Percentage [LO 6-4, LO 6-6] [The following information applies to the questions displayed below.] Campus Stop, Inc., is a student co-op. Campus Stop uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: $268,900 a. Sold merchandise for cash (cost of merchandise $149, 510). b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $760). c. Sold merchandise (costing $7,650) to a customer on account with terms n/30. d. Collected half of the balance owed by the customer in (c). e. Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. 1,710 17,000 8,500 1,740 CP6-3 Part 4 4. Campus Stop is considering a contract to sell merchandise to a campus organization for $14,000. This merchandise will cost Campus Stop $11,000. Would this contract increase (or decrease) Campus Stop's dollars of gross profit and its gross profit percentage? TIP: The impact on gross profit dollars may differ from the impact on gross profit percentage. (Round "Gross Profit Percentage" to 1 decimal place.) Gross Profit Gross Profit Percentage

Answer 1

Net sales = $268,900 - $1,710 + $17,000 - $1,740 =$282,450

Cost of goods sold = $149,510 - $760 + $7,650 = $156,400

Gross profit = $282,450 - $156,400 = $126,050

Gross profit percentage = $126,050 / $282,450 = 44.63%

Total sales = $282,450 + $14,000 = $296,450

Total cost of goods sold = $156,400 + $11,000 = $167,400

Gross profit = $296,450 - $167,400 = $129,050

4.

Gross profit increases by $3,000 ($129,050 - $126,050)

Gross profit ratio = $129,050 / $296,450 = 43.53%

Gross profit percentage decrease to 43.5%