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Larry’s Building Supplies (LBS) is a locally owned and operated hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected from 2013: 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 an allowance to the customer in ( c )………………………………………. 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). 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’s gross profit and gross profit percentage? How should LBS decide whether to accept the contract? View Solution:
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