Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. Thefollowing transactions (summarized) have been selected for analysis:a. Sold merchandise for cash (cost of merchandise $28,797). $51,200b. Received merchandise returned by customers as unsatisfactory (but inperfect condition) for cash refund (original cost of merchandise $360). 600c. Sold merchandise (costing $4,750) to a customer on account with terms2/10, n/30. 10,000d. Collected half of the balance owed by the customer in ( c ) within the discount period. 4,900e. Granted a partial allowance relating to credit sales that the customer in ( c ) hadnot yet paid. 160Required:1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.2. Compute the gross profit percentage (using the formula shown in this chapter and rounding toone decimal place).3. Prepare journal entries to record transactions ( a )–( e ).4. Hair World is considering a contract to sell merchandise to a hair salon chain for $15,000.This merchandise will cost Hair World $10,000. Would this contract increase (or decrease)Hair World’s gross profit and gross profit percentage?
Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The
following transactions (summarized) have been selected for analysis:
a. Sold merchandise for cash (cost of merchandise $28,797). $51,200
b. Received merchandise returned by customers as unsatisfactory (but in
perfect condition) for cash refund (original cost of merchandise $360). 600
c. Sold merchandise (costing $4,750) to a customer on account with terms
2/10, n/30. 10,000
d. Collected half of the balance owed by the customer in ( c ) within the discount period. 4,900
e. Granted a partial allowance relating to credit sales that the customer in ( c ) had
not yet paid. 160
Required:
1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.
2. Compute the gross profit percentage (using the formula shown in this chapter and rounding to
one decimal place).
3. Prepare
4. Hair World is considering a contract to sell merchandise to a hair salon chain for $15,000.
This merchandise will cost Hair World $10,000. Would this contract increase (or decrease)
Hair World’s gross profit and gross profit percentage?
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