Question

Required information PB6-3 Recording Sales and Purchases with Discounts and Returns and Analyzing Gross Profit Percentage [LO 6-4, LO 6-5) [The following information applies to the questions displayed below.) Larry's Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis $500,000 a. Sold merchandise for cash (cost of merchandise $224,350) b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $1,900). C. Sold merchandise (costing $3,000) to a customer on account with term 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. 3.000 5,000 2.500

Answer 1

Date	Account Titles	Debit	Credit
a	Cash	$       5,00,000
	Sales Revenue		$           5,00,000
	(Sales made for cash)
	Cost of Goods Sold	$       2,24,350
	Inventory		$           2,24,350
	(Cost of Goods Sold recorded)
b	Sales returns and allowances	$             3,000
	Cash		$                 3,000
	(Cash refund made for return)
	Inventory	$             1,900
	Cost of Goods Sold		$                 1,900
	(Inventory added back)
c	Accounts Receivable	$             5,000
	Sales Revenue		$                 5,000
	(Sales made on account)
	Cost of Goods Sold	$             3,000
	Inventory		$                 3,000
	(Cost of Goods Sold recorded)
d	Cash	$             2,500
	Accounts Receivable		$                 2,500
	(Collected Cash)
e	Sales returns and allowances	$                 950
	Accounts Receivable		$                    950
	(Sales allowance granted)

Net Sales	$        5,01,050	=500000-3000+5000-950
Cost of Goods Sold	$        2,25,450	=224350-1900+3000
Gross Profit	$        2,75,600
Gross Profit (%)	55.00%

4.

Net Sales	$        5,01,050	$ 5,21,050
Cost of Goods Sold	$        2,25,450	$ 2,41,450
Gross Profit	$        2,75,600	$ 2,79,600	$    4,000
Gross Profit (%)	55.00%	53.66%	-1.34%

Gross Profit increase by $4000
Gross Profit (%) decrease by 1.34%