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:a. Sold merchandise for cash (cost of merchandise $224,350). $500,000b. Received merchandise returned by customers as unsatisfactory(but in perfect condition) for cash refund (original cost of merchandise $1,900). 3,000c. Sold merchandise (costing $3,000) to a customer on account with terms 2/10, n/30. 5,000d. Collected half of the balance owed by the customer in ( c ) within the discount period. 2,450e. Granted a partial allowance relating to credit sales that the customer in ( c ) hadnot yet paid. 950Required:1. Compute Sales Revenue, Net Sales, and Gross Profit for LBS.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. LBS is considering a contract to sell building supplies to a local home builder for $20,000.These materials will cost LBS $16,000. Would this contract increase (or decrease) LBS’sgross profit and gross profit percentage?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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:
a. Sold merchandise for cash (cost of merchandise $224,350). $500,000
b. Received merchandise returned by customers as unsatisfactory
(but in perfect condition) for cash refund (original cost of merchandise $1,900). 3,000
c. Sold merchandise (costing $3,000) to a customer on account with terms 2/10, n/30. 5,000
d. Collected half of the balance owed by the customer in ( c ) within the discount period. 2,450
e. Granted a partial allowance relating to credit sales that the customer in ( c ) had
not yet paid. 950
Required:
1. Compute Sales Revenue, Net Sales, and Gross Profit for LBS.
2. Compute the gross profit percentage (using the formula shown in this chapter and rounding to
one decimal place).
3. Prepare
4. LBS is considering a contract to sell building supplies to a local home builder for $20,000.
These materials will cost LBS $16,000. Would this contract increase (or decrease) LBS’s
gross profit and gross profit percentage?
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