4. A cash payment ot $20 for treight on merchandise purchases was debited to Fre

Question

4. A cash payment ot $20 for treight on merchandise purchases was debited to Freight- Out $200 and credited to Cash $200. Prepare separate correcting entries for each error, assuming that the incorrect entry is ne reversed. (Omit explanations.) Instructions E5-12 In 2017, Laquen Company had net sales of $900,000 and cost of goods sold of $522,000. Operating expenses were $225,000, and interest expense was $11,000. Laquen prepares a multiple-step income statement. Instructions (a) Compute Laquen's gross profit. (b) Compute the gross profit rate. Why is this rate computed by financial statement (c) What is Laquen's income from operations and net income? (d) If Laquen prepared a single-step income statement, what amount would it report for users? net income? (e) In what section of its classified balance sheet should Laquen report inventory? E5-13 Presented below is financial information for two different companies Summer Compan Winter Company Sales revenue Sales returns Net sales Cost of goods sold Gross profit $92,000 (a $ 5,000 102,000 56,000

Explanation / Answer

Income Statement: Sales revenue 900000 Less: Cost of goods sold 522000 Gross Profit 378000 Less: Operating expenses 225000 Operating income 153000 Less: Non Operating expenses Interest expense 11000 Net income 142000 Req a. Gross Profit: $ 378000 Req b: Gross Profit Rate = Gross Profit/ sales *100 378000 /900000 *100 = 42% Gross Profit rate is used by the user of the financial statement to know the profit markup used for selling the product and any changes in same due to increassed cost or reduced efficiency. Req c: Income from operations: $ 153000 Net Income earned: $ 142000 Req d: Income Statement (Single step) Sales revenue 900000 Less: Expenses Cost of goods sold 522000 Operating expenses 225000 Interest expenses 11000 Net income 142000 Net income that will be reported is $ 142000 Req e: The Current Assets section of Assets will reflect the inventory account

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