Chapter 6, Problem 4E

Determining the Effects of Credit Sales, Sales Discounts, Credit Card Sales, and Sales Returns and Allowances on Income Statement Categories

Brazen Shoe Company records Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts as contra-revenues. Complete the following tabulation, indicating the effect (+ for increase, − for decrease, and NE for no effect) and amount of the effects of each transaction, including related cost of goods sold.

July	12	Sold merchandise to customer at factory store who charged the $300 purchase on her American Express card. American Express charges a 1 percent credit card fee. Cost of goods sold was $175.
July	15	Sold merchandise to Customer T at an invoice price of $5,000; terms 3/10, n/30. Cost of goods sold was $2,500.
July	20	Collected cash due from Customer T.
July	21	Before paying for the order, a customer returned shoes with an invoice price of $1,000, and cost of goods sold was $600.

Transaction	Net Sales	Cost of Goods Sold	Gross Profit
July 12
July 15
July 20
July 21