Question

Sales transactions The following selected transactions were completed by Affordable Supplies Co., which sells supplies primarily to wholesalers and occasionally to retail customers. Jan. 6. Sold merchandise on account, $14,000, terms FOB shipping point, n/eom. The cost of merchandise sold was $8,400 8. Sold merchandise on account, $20,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $14,000 16. Sold merchandise on account, $19,500, terms FOB shipping point, n/30. The cost of merchandise sold was $11,700. 18. Received check for amount due for sale on January 8. 19. Issued credit memorandum for $4,500 for merchandise returned from sale on January 16, The cost of the merchandise returned was $2,700 26. Received check for amount due for sale on January 16 less credit memorandum of January 19 31. Paid Cashell Delivery Service $3,000 for merchandise delivered during January to customers under shipping terms of FOB destination 31. Received check for amount due for sale of January 6 Indicate the effects of each transaction on the liquidity metric working capital and profitability metric gross profit percent. Enter amounts that decrease net income as negative values, Round percentage values to 1 decimal place. If no entry is required, select "No effect from the dropdown and leave the corresponding number entry box blank. Metric Effects Liquidity Profitability Transaction working capital Ability to Achieve Gross Profit Percent of 3090 40 %) 30 X %) Jan. 6 Increase 14,000X 20,000 X 19,500 X 20,000X 4,500>X 15,000 X Increase X Increase 40 16 18 19 26 31 31 Total Decrease X Decrease X No Effect Decrease X No Effect -40 X %) 3,000 15 X %) 14,000X 3,000 X

Answer 1

	Affordable Supplies Company
	Date	Effect	Increase/Decrease	Percentage
	6-Jan	5600	Increase	40%
	8-Jan	6000	Increase	30%
	16-Jan	7800	Increase	40%
	18-Jan	-200	Decrease	0.71%
	19-Jan	-1800	Decrease	4%
	26-Jan	No effect	No effect
	31-Jan	-3000	No effect
	31-Jan	No effect	No effect
	Working
6-Jan	Accounts Receivable	$ 14,000.00
	To Sales		$                            14,000.00
	Cost of goods sold	$    8,400.00
	To Merchandise Inventory		$                              8,400.00
	Working Capital=Current Assets-Current Liabilities
	Current Assets Increases by($14000-$8400)=$5600
	Gross Profit=Sales-Cost of goods sold=$14000-$8400=$5600
	Gross Profit Ratio=	Gross Profit/Sales=($5600/$14000)
8-Jan	Accounts Receivable	$ 20,000.00
	To Sales		$                            20,000.00
	Cost of goods sold	$ 14,000.00
	To Merchandise Inventory		$                            14,000.00
	Working Capital=Current Assets-Current Liabilities
	Current Assets Increases by($20000-$14000)=$6000
	Gross Profit=Sales-Cost of goods sold=$20000-$14000=$6000
	Gross Profit Ratio=	Gross Profit/Sales=($6000/$20000)
16-Jan	Accounts Receivable	$ 19,500.00
	To Sales		$                            19,500.00
	Cost of goods sold	$ 11,700.00
	To Merchandise Inventory		$                            11,700.00
	Working Capital=Current Assets-Current Liabilities
	Current Assets Increases by($19500-$11700)=$7800
	Gross Profit=Sales-Cost of goods sold=$19500-$11700=$7800
	Gross Profit Ratio=	Gross Profit/Sales=($7800/$19500)
18-Jan	Cash	$ 19,800.00
	Sales Discount	$        200.00
	To Accounts Receivable		$                            20,000.00
	Working Capital=Current Assets-Current Liabilities
	Current Assets Decreases by($20000-$19800)=$200
	Gross Profit=(Sales-Sales Discount)-Cost of goods sold=$19800-$14000=$5800
	Gross Profit Ratio=	Gross Profit/Sales=($5800/$19800)
19-Jan	Sales Return & Allowances	$    4,500.00
	To Accounts receivable		$                              4,500.00
19-Jan	Merchandise Inventory	$    2,700.00
	To Cost of goods sold		$                              2,700.00
	Working Capital=Current Assets-Current Liabilities
	Current Assets Decreases by($4500-$2700)=$1800
	Gross Profit=
	Net Sales=($19500-$4500)=	15000
	Cost of good sold=($11700-$2700)	14400
	Gross Profit=	600
	GrossProfit Ratio=	4%
26-Jan	Cash=($19500-$4500)=$15000	$ 15,000.00
	To Accounts Receivable		$                            15,000.00
31-Jan	Freight Outward	$    3,000.00
	To Cash		$                              3,000.00
	Freight outward is an indrect Expense not a part of Gross Profit
31-Jan	Cash	$ 14,000.00
	To Accounts Receivable		$                            14,000.00