Question

Exercise 1. Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale? Show calculations. Exercise 2. Fill in the blanks (a) through (g) for the Morrison Company for each of the income statements for years 1, 2, and 3. Morrison Company Income Statements For the years ended December 31 Year 1 Year 2 Year 3 Sales $7,500 $10,000 (f) Cost of goods sold Merchandise inventory (beginning) (a) 375 750 Total cost of merchandise purchases 2,400 3,625 4,875 Merchandise inventory (ending) (b) 750 625 Cost of goods sold 2,770 (d) 5,000 Gross profit (c) 6,750 5,200 Operating expenses 3,750 3,750 (g) Net income $ 980 (e) $2,500

Exercise #1 and #2. Good feedback.

Answer 1

FOR FOB free on board shipping cost is to be bourne by buyer.

so it will not be included into sales revenue

as 100 units are sold40% discount will be provided(50>)

=100*300 - 40%

=18000$

2.

	1	2	3
sales	7500	10000	10200[5000+5200]
cost of goods sold
beginning	745[2770-2400+375]	375	750
purchase	2400	3625	4875
ending	375*	750	625
cost of good ssold	2770	3250[375+3625-750]	5000
gross profit	4730[7500-2770]	6750	5200
operating expense	3750	3750	2700[5200-2500]
net income	980	3000[6750-3750]	2500

sales - cost of goods sold =gross profit

gross profit- operating exps = net income

beginning inventory+purchase-ending inventory = cost of goods sold

*year 2 beginning is year 1 ending inventory