Merchandise is sold on February 1 by Derzon Company on account to Warner Company
ID: 2508621 • Letter: M
Question
Merchandise is sold on February 1 by Derzon Company on account to Warner Company ($90,000) with the terms 3/15, n/45; On February 7 Warner Company returns ($12,000) of merchandise that cannot be resold (damaged, etc. … Hint: if it can’t be resold, do you add it back to inventory? Do you reduce the Cost of Goods Sold?); When Warner Company returned the merchandise to Derzon Company (Seller), Warner Company also sent along a check for the balance owed. What is the journal entry/entries Derzon Company would make when it receives the check and the returned merchandise? Remember: The (A) return and the (B) receipt of the payment all happen at the same time. Also, remember that you need to keep in mind what entry was made by Derzon when the merchandise was sold on February 1. Use T-accounts to make sure you do this correctly! Treat this as two separate entries on the same day.
Calculate Gross Profit given: Expenses $25,000; Sales $130,000, Cost of Goods Sold $40,000. Gross Profit = ? 11. Calculate Net Sales given Expenses ($132,500), Sales Returns & Allowances ($6,700), Sales Discounts ($5,000), Sales Revenue ($536,800) and Cost of Goods Sold ($363,400). Net Sales = ?
Explanation / Answer
Entries in books of Derzon Company
At the time of goods sold
Feb.1 Warner company a/c...........Dr $90000
To Sales a/c $90000
When goods returned and payment is made
Feb. 7 Sales Return a/c ........ Dr $12000
To warner company a/c $12000
Bank a/c ....................Dr $75660
Discount a/c ..............Dr $ 2340
TO warner company a/c $78000
(3% discount on $78000. because payment is made in 15 days)
Note: If these goods can be resold then it would back in inventory.
Calculation on Gross Profit
Gross Profit = Sales - COGS
$130000- $40000= $90000
Calculation of net sales
Net sales = Sales Revenue - Sales Return - Sales Discount
$536800- $ 6700 - $5000 = $ 525100