Chapter 5: Q27E (page 303)
Crazy Cookies earned net sales revenue of \(66,000,000 in 2018. The cost of goods sold was \)39,600,000, and net income reached $7,000,000, the company’s highest ever. Compute the company’s gross profit percentage for 2018.
The gross profit percentage of the company is40%
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Match the accounting terms with the corresponding definitions.
1. Credit Terms a. The cost of the merchandise inventory that the business has sold to customers.
2. FOB Destination b. An amount granted to the purchaser as an incentive to keep goods that are not “as ordered.”
3. Invoice c. A type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers.
4. Cost of Goods Sold d. A situation in which the buyer takes ownership (title) at the delivery destination point.
5. Purchase Allowance e. A type of merchandiser that buys goods from manufacturers and then sells them to retailers.
6. FOB Shipping Point f. A discount that businesses offer to purchasers as an incentive for early payment.
7. Wholesaler g. A situation in which the buyer takes title to the goods after the goods leave the seller’s place of business.
8. Purchase Discount h. The terms of purchase or sale as stated on the invoice.
9. Retailer i. A seller’s request for cash from the purchaser.
The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:
ROCKIN ROBBIN DANCE COMPANY
Adjusted Trial Balance
April 30, 2018
Balance
Account Title Debit Credit
Cash \(4,400
Accounts Receivable 38,000
Merchandise Inventory 17,800
Office Supplies 850
Furniture 39,900
Accumulated Depreciation-Furniture \)8,300
Accounts Payable 14,100
Salaries Payable 1,000
Unearned Revenue 6,500
Notes Payable, long-term 12,000
Common Stock 5,000
Retained Earnings 36,150
Dividends 40,000
Sales Revenue 178,500
Cost of Goods Sold 83,700
Selling Expense 19,000
Administrative Expense 16,000
Interest Expense 1,900
Total \(261,550 \)261,550
Requirements
1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018.
2. Journalize Rockin Robbin’s closing entries.
3. Prepare a post-closing trial balance as of April 30, 2018.
M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold for the year.
Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?
The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:
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