Homework Answers
Answer is $1,729
| Working Notes: | ||
| CALCULATION OF THE MARGIN RATIO | ||
| Particulars | Amount | |
| Sales | $ 179,000 | |
| Less: Cost of Sales | $ 116,350 | |
| Gross Profit | $ 62,650 | |
| Gross Profit Margin % = | ||
| Gross Profit | $ 62,650 | |
| Divide By | "/" By | |
| Sales | $ 179,000 | |
| Equal to | 0.35 | |
| Multiply By | "X" By 100 | |
| Equal to | 35% | |
| It means Jubilee, Inc. earnings is 35% on sales | ||
| Solution: | ||
| Caclulation of Amount of Gross Profit Which Jubilee Defer in reporting his investment | ||
| Ending Inventory JPW Company holds at the end of year = | $ 24,700 | |
| Gross Margin on this inventory = 35% of $ 24,700 = | $8,645 | |
| Share of Jubilee in JPW Company = | 20% | |
| Share of profit in ending inventory = ($8,645 X 20%)= | $1,729 | |
| Answer = Jubilee can defer in reporting this investment = $ 1,729 |
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