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Chapter 5: Q12SE (page 296)

Macarthy Landscape Supply鈥檚 selected accounts as of December 31, 2018, follow. Compute the gross profit percentage for 2018.

Selling Expenses $ 12,900

Interest Revenue 900

Net Sales Revenue 134,700

Cost of Goods Sold 114,000

Administrative Expenses 10,200

Short Answer

Expert verified

Answer

The gross profit percentage of the company is15.36%.

Step by step solution

01

Meaning of Gross Profit

In accounting, the term gross profit refers to the amount of profit left with the company after making payment of alldirect and indirect expenses associated with the production of the goods or services.

02

Computation of gross profit

GrossProfit=Netsales-Costofgoodssold=$134,700-$114,000=$20,700

03

Computation of gross profit percentage

Grossprofitpercentage=GrossprofitNetsalesrevenue脳100=$20,700$134,700脳100=15.36%

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Most popular questions from this chapter

Consider the following transactions for Garman Packing Supplies:

Apr. 10 Garman Packing Supplies buys \(175,000 worth of merchandise inventory on account with credit terms of 1/10, n/30.

12 Garman returns \)15,200 of the merchandise to the vendor due to damage during shipment.

19 Garman paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions assuming Garman Packing Supplies uses the periodic inventory system. Explanations are not required.

2. What is the amount of net purchases?

The unadjusted trial balance for Tuttle Electronics Company follows:

TUTTLE ELECTRONICS COMPANY

Unadjusted Trial Balance

October 31, 2018

Balance

Account Title Debit Credit

Cash \(4,200

Accounts Receivable 33,800

Merchandise Inventory 45,700

Office Supplies 5,700

Equipment 129,500

Accumulated Depreciation-Equipment \)37,200

Accounts Payable 15,600

Unearned Revenue 13,400

Notes Payable, long-term 53,000

Common Stock 48,000

Retained Earnings 6,700

Dividends 27,000

Sales Revenue 300,300

Cost of Goods Sold 171,600

Salaries Expense (Selling) 26,000

Rent Expense (Selling) 15,400

Salaries Expense (Administrative) 4,800

Utilities Expense (Administrative) 10,500

Total \(474,200 \)474,200

Requirements

1. Journalize the adjusting entries using the following data:

a. Interest revenue accrued, \(550.

b. Salaries (Selling) accrued, \)2,800.

c. Depreciation Expense鈥擡quipment (Administrative), \(1,295.

d. Interest expense accrued, \)1,500.

e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of \(45,300.

f. Tuttle estimates that approximately \)6,200 of merchandise sold will be returned with a cost of $2,480.

2. Prepare Tuttle Electronics鈥檚 adjusted trial balance as of October 31, 2018.

3. Prepare Tuttle Electronics鈥檚 multi-step income statement for year ended October 31, 2018.

Howie Jewelers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required.

Jun. 20 Purchased inventory of \(5,100 on account from Sanders Diamonds, a jewelry importer. Terms were 2/15, n/45, FOB shipping point.

20 Paid freight charges, \)400.

Jul. 4 Returned \(600 of inventory to Sanders.

14 Paid Sanders Diamonds, less return.

16 Purchased inventory of \)3,500 on account from Southboro Diamonds, a jewelry importer. Terms were 2/10, n/EOM, FOB destination.

18 Received a $300 allowance from Southboro Diamonds for damaged but usable goods.

24 Paid Southboro Diamonds, less allowance, and discount.

What are the two types of inventory accounting systems? Briefly describe each.

Ocean Life Boat Supply uses the periodic inventory method. The adjusted trial balance of Ocean Life Boat Supply at December 31, 2018, follows:

Requirements

1. Journalize the required closing entries at December 31, 2018. Assume ending Merchandise Inventory is $54,300.

2. Set up T-accounts for Income Summary; Retained Earnings; and Dividends. Post the closing entries to the T-accounts, and calculate their ending balances.

3. How much was Ocean Life鈥檚 net income or net loss?
See all solutions

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