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Chapter 5: Q5-6TI (page 273)

Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses $ 10,500

Interest Revenue 1,000

Net Sales Revenue 113,500

Cost of Goods Sold 85,000

Administrative Expenses 8,000

Determine the gross profit percentage for the year ended December 31, 2018.

Short Answer

Expert verified

The gross profit percentage of the company is 25.11%.

Step by step solution

01

Meaning of Gross Profit

Gross profit refers to the profit left with the company after making the settlement of all the costs and expenses associated with the manufacturing and sale of a product from its net sales revenue.

02

Computation of gross profit percentage

Gross profit percentage=Net sales revenue-Cost of goods soldNet sales×100=$113,500-$85,000$113,500×100=$28,500$113,500×100=25.11%

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Most popular questions from this chapter

Question: Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses $ 10,500

Interest Revenue 1,000

Net Sales Revenue 113,500

Cost of Goods Sold 85,000

Administrative Expenses 8,000

Prepare the multi-step income statement for the year ended December 31, 2018.

Describe the multi-step income statement.

Question: Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of \)150 on January 4 purchase.

8 Returned half the inventory purchased on January 4 from Vanderbilt Company.

10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.

11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.

12 Paid freight bill of \(30 on January 10 sale.

13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.

14 Paid the amount owed on account from January 4, less return and discount.

18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.

20 Received cash from Gilmore Corporation, less discount.

26 Paid amount owed on account from January 18, less discount.

28 Received cash from Cadet Company.

29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.

Click Computers has the following transactions related to the sale of merchandise inventory.

Mar. 1 Sold a computer (cost of \(3,000) for \)8,000 to a customer. The customer paid cash. The sales price included a one-year service contract valued at $168.

Dec. 31 Recorded the amount of service contract earned.

Journalize the transactions for Click Computers assuming that the company uses the perpetual inventory system.

Journalize the following transactions that occurred in November 2018 for May’s Adventure Park. Assume May’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Nov. 4 Purchased merchandise inventory on account from Valera Company, \(8,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of \)160 on November 4 purchase.

8 Returned half the inventory purchased on November 4 from Valera Company.

10 Sold merchandise inventory for cash, \(1,700. Cost of goods, \)680. FOB destination.

11 Sold merchandise inventory to Garrison Corporation, \(10,300, on account, terms of 3/10, n/EOM. Cost of goods, \)5,150. FOB shipping point.

12 Paid freight bill of \(30 on November 10 sale.

13 Sold merchandise inventory to Cain Company, \)9,000, on account, terms of 1/10, n/45. Cost of goods, \(4,500. FOB shipping point.

14 Paid the amount owed on account from November 4, less return and discount.

18 Purchased inventory of \)3,700 on account from Regan Corporation. Payment terms were 2/10, n/30, FOB destination.

20 Received cash from Garrison Corporation, less discount.

26 Paid amount owed on account from November 18, less discount.

28 Received cash from Cain Company.

29 Purchased inventory from Sanders Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)200.
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