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

5-12) a . Gross profit = net sales - cost of goods sold

= 900000 - 522000

= $378000

b. Gross profit rate = Gross profit / net sales

= 378000 / 900000

= 42%

It is calculated to find out the profit genereated out of sales made during the period

c. Multistep Income statement   

net sales = 900000

less: cost of goods sold = 522000

Gross profit = 378000

less: Operating expenses = 225000

Income from operation = 153000

less: Interest expense = 11000

Net income = 142000

d)     Single Income statement   

revenue:

net sales = 900000

less: Expenses

cost of goods sold =  522000

Operating expenses = 225000

Interest expense = 11000

Total expenses = 758000

Net income = 142000

e) Inventory will be reported in Assets side of Balance sheet in Current assets section .

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