Sales transactions The following selected transactions were completed by Afforda

Question

Sales transactions The following selected transactions were completed by Affordable Supplies Co., which sells supplies primarily to wholesalers and occasionally to retail customers. Jan. 6. Sold merchandise on account, $14,000, terms FOB shipping point, n/eom. The cost of merchandise sold was $8,400 8. Sold merchandise on account, $20,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $14,000 16. Sold merchandise on account, $19,500, terms FOB shipping point, n/30. The cost of merchandise sold was $11,700. 18. Received check for amount due for sale on January 8. 19. Issued credit memorandum for $4,500 for merchandise returned from sale on January 16, The cost of the merchandise returned was $2,700 26. Received check for amount due for sale on January 16 less credit memorandum of January 19 31. Paid Cashell Delivery Service $3,000 for merchandise delivered during January to customers under shipping terms of FOB destination 31. Received check for amount due for sale of January 6 Indicate the effects of each transaction on the liquidity metric working capital and profitability metric gross profit percent. Enter amounts that decrease net income as negative values, Round percentage values to 1 decimal place. If no entry is required, select "No effect from the dropdown and leave the corresponding number entry box blank. Metric Effects Liquidity Profitability Transaction working capital Ability to Achieve Gross Profit Percent of 3090 40 %) 30 X %) Jan. 6 Increase 14,000X 20,000 X 19,500 X 20,000X 4,500>X 15,000 X Increase X Increase 40 16 18 19 26 31 31 Total Decrease X Decrease X No Effect Decrease X No Effect -40 X %) 3,000 15 X %) 14,000X 3,000 X

Explanation / Answer

Affordable Supplies Company Date Effect Increase/Decrease Percentage 6-Jan 5600 Increase 40% 8-Jan 6000 Increase 30% 16-Jan 7800 Increase 40% 18-Jan -200 Decrease 0.71% 19-Jan -1800 Decrease 4% 26-Jan No effect No effect 31-Jan -3000 No effect 31-Jan No effect No effect Working 6-Jan Accounts Receivable $ 14,000.00    To Sales $                            14,000.00 Cost of goods sold $    8,400.00    To Merchandise Inventory $                              8,400.00 Working Capital=Current Assets-Current Liabilities Current Assets Increases by($14000-$8400)=$5600 Gross Profit=Sales-Cost of goods sold=$14000-$8400=$5600 Gross Profit Ratio= Gross Profit/Sales=($5600/$14000) 8-Jan Accounts Receivable $ 20,000.00    To Sales $                            20,000.00 Cost of goods sold $ 14,000.00     To Merchandise Inventory $                            14,000.00 Working Capital=Current Assets-Current Liabilities Current Assets Increases by($20000-$14000)=$6000 Gross Profit=Sales-Cost of goods sold=$20000-$14000=$6000 Gross Profit Ratio= Gross Profit/Sales=($6000/$20000) 16-Jan Accounts Receivable $ 19,500.00    To Sales $                            19,500.00 Cost of goods sold $ 11,700.00     To Merchandise Inventory $                            11,700.00 Working Capital=Current Assets-Current Liabilities Current Assets Increases by($19500-$11700)=$7800 Gross Profit=Sales-Cost of goods sold=$19500-$11700=$7800 Gross Profit Ratio= Gross Profit/Sales=($7800/$19500) 18-Jan Cash $ 19,800.00 Sales Discount $        200.00     To Accounts Receivable $                            20,000.00 Working Capital=Current Assets-Current Liabilities Current Assets Decreases by($20000-$19800)=$200 Gross Profit=(Sales-Sales Discount)-Cost of goods sold=$19800-$14000=$5800 Gross Profit Ratio= Gross Profit/Sales=($5800/$19800) 19-Jan Sales Return & Allowances $    4,500.00      To Accounts receivable $                              4,500.00 19-Jan Merchandise Inventory $    2,700.00     To Cost of goods sold $                              2,700.00 Working Capital=Current Assets-Current Liabilities Current Assets Decreases by($4500-$2700)=$1800 Gross Profit= Net Sales=($19500-$4500)= 15000 Cost of good sold=($11700-$2700) 14400 Gross Profit= 600 GrossProfit Ratio= 4% 26-Jan Cash=($19500-$4500)=$15000 $ 15,000.00    To Accounts Receivable $                            15,000.00 31-Jan Freight Outward $    3,000.00     To Cash $                              3,000.00 Freight outward is an indrect Expense not a part of Gross Profit 31-Jan Cash $ 14,000.00     To Accounts Receivable $                            14,000.00

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