ACCOUNTG 221 Lecture Notes - Lecture 2: Gross Margin, Net Income, Income Statement

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fuchsiamosquito455

22 Aug 2016

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Product costs- (inventory costs) examples; price of goods purchased, shipping and handling costs, transit insurance, and storage costs. Expensed when products are sold; regardless of when they are purchased. Selling and administrative costs- examples; advertising, administrative, salaries, sales commissions, and insurance. Usually recognized as expenses in the period in which they are incurred. Gross margin (gross profit)= net sales cost of goods sold. The selling and administrative expenses are subtracted form the gross margin to get net income. Perpetual inventory system- inventory account is adjusted continually throughout the accounting period. Each time merchandise is purchased the inventory account is increased. Purchase returns and allowances- on financial statements returns and allowances are combined in one entry. Allowances are a reduction of price of a good because the customer is dissatisfied. Purchase discount- when a cash discount is applied to a purchase. Annual rate= discount rate x (365 days / terms of the loan)

Related Questions

The adjusted trial balance of Foster Products Company includedthe following balances for 12- 31-15, which was the first year ofoperations

Accounts Payable $ 18000

Accumulated Depreciation 35000

Advertising Expense 17800

Cash 7400

Common Stock 3000

Cost of Goods Sold 75800

Depreciation Expense 3000

Dividends 2000

Equipment 81800

Insurance

Expense 2800

Interest Revenue 500

Inventory 24000

Prepaid Insurance 3800

Rent Expense 26000

Retained Earnings 40000

Salaries Expense 63000

Sales 226600

Sales Discounts 1000

Sales Returns and Allowances 5000

Supplies 3700

Supplies Expense 6000

________

323100 323100

Rent expense and salaries expense are equally divided betweenselling activities and general and administrative activities.

Required:

1. Prepare a Multiple Step Income Statement for 12-31-15.(Categorize the Operating Expenses into Selling Expenses andGeneral/Administrative Expenses.

2.Calculate the Following Ratios AND provide a briefinterpretation about each one.

a. Return on Assets

b. Gross Margin Ratio

c. Profit Margin

peachtermite72

The following information was taken from the accounting recordsof the Ross Manufacturing Company. Unfortunately, some of the datawere destroyed by a computer malfunction.

Case C

Sales 40,000

Finished goods inventory, January 1, 2012 5,000

Finished goods inventory, December 31, 2012 6,000

Cost of goods sold ?

Gross margin 15,000

Selling and administrative expenses ?

Net income 10,000

Work-in-process, January 1, 2012 ?

Direct material used 6,000

Direct labor 7,000

Factory overhead 10,000

Manufacturing costs incurred during 2012 ?

Work-in-process, December 31, 2012 4,000

Cost of goods manufactured ?

Direct materials inventory, January 1, 2012 1,000

Direct materials inventory, December 31, 2012 3,000

Direct materials purchased throughout 2012 8,000

Solve for the ? marks

chocolatecicada278

P8-15 Comprehensive The following information for 2010is availablefor the Marino company:

1. The beginning inventoryis$100,000

2. Purchases of $300,000 weremadeon terms of 2/10, n/30. Eighty percent of the discountsweretaken.

3. Purchases returns of $4000weremade.

4. At December 31, purchasesof$20,000 were in transit, FOB destination, on terms of2/10,n/30.

5. The company made salesof$640,000. The gross selling price per unit is twice the net costofeach unit sold.

6. Sales allowances of $6,000weremade.

7. The company uses theLIFOperiodic method and the gross method for purchasesdiscounts.

1. Compute the cost of theendinginventory before the physical inventory is taken.

2. Compute the amount of thecostof goods sold that came from the purchases of the period andtheamount that came from the beginning inventory.

taupegrasshopper316

ACCOUNTG 221 Lecture Notes - Lecture 2: Gross Margin, Net Income, Income Statement

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