us Os urth lanatio 6. Financial information is presented below, Gross profit wou
ID: 2589483 • Letter: U
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us Os urth lanatio 6. Financial information is presented below, Gross profit would be a. $49,000 b. $42,000 c. $45,000 d. $52,000 Operating expenses $ 28,000 Sales returns and allowances7,000 Sales discounts $3,000 150,000 S 98,000 Sales revenue Cost of goods sold 7. These are selected account balances on December 31, 2017. What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $2,250,000 b. $1,950,000 c. $2,700,000 d. $1,725,000 $150,000 Land (held for future use) $225,000 Land $1,200,000 $300,000 $675,000 $150,000 Accumulated Depreciation $450,000 Buildings Inventory Equipment Furniture 8. Sampson Company's accounting records show the following for the year ending on December 31, 2017, Using the periodic system, the cost of goods purchased is a. $660,420 b. $708,420 c. $717,220 d. $691,620 $ 11,200 S15,600 $ 700,020 $ 47,000 $57,600 Purchase Returns and Allowances 12,800 Purchase Discounts Freight-In Purchases Inventory Ending Inventory 9. Shaffer Company acquires land for S77,000 cash. Additional costs are as follows, Shaffer will record the acquisition cost of the land as:- a. $77,000 b. $78,690 c. $80,610 d. $80,370 Removal of shed S 300 Filling and grading S 1,500 Salvage value of lumber of shed S 120 Broker commission Paving of parking lot Closing costs S 1,130 S 10,000 $ 560Explanation / Answer
6)Gross margin means net sales revenue less cost of goods sold. It is also known as gross profit before selling and administrative expenses. It indicates the gross profit generated by sale of goods.
Sales revenue means total revenue generated by sale of goods during a set time period. But during business it happens that client may return some goods due to defects. Also they may ask for discount as they pay amount in cash. So, Net sales is calculated by subtracting sales return and sales discount from sales revenue. Therefore, gross profit will be calculated as follows:
Gross profit = Sales revenue - sales discount - Sales return and allowances - cost of goods sold.
Gross profit = $150,000-$3,000-$7,000-$98,000
Gross profit = $42,000
So, gross profit is $42,000 therefore option (b) is correct.
7) Property, plant and equipment (PPE) include those assets which are used in day-to-day business operations. Land and building is used for operational purpose, equipment and machinery is used for production, vehicle is used for delivery of goods. That is why the depreciation charged to them against thier useful life.
Inventory being a current asset will not be included in (PPE). Land (held for future use) falls under investment category so it will not be included in property, plant and equipment.
The amount of property, plant and equipment that will appear in balance sheet is as follows:
Net property, plant and equipment = Land+Building+Equipment+Furniture-Accumulated depreciation
Net property, plant and equipment =$150,000+$1,200,000+$675,000+$150,000-$450,000
Net property, plant and equipment = $1,725,000
Therefore, net property, plant and equipment worth $1,725,000 will appear on balance sheet. So, option (d) is correct.
8) Cost of goods purchase include all costs incurred to acquire the goods. It include net purchases and inward freight expenses incurred to bring the goods to company. Net purchases is calcuated by subtracting purchases return and discounts from purchases. Therefore, cost of purchases will be calculated as below:
Cost of purchases = Purchases-purchase return and allowances -purchase discounts+Freight-in
Cost of purchases = $700,020 -$12,800-$11,200+$15,600
Cost of purchases = $691,620
So, cost of purchases is $691,620 therefore option (d) is correct.
9) The cost of land will include its purchase price, property tax, commission, insurance, survey and legal fees and fees associated with transferring the ownership, cost of clearing the land. These costs have been incurred to purchase land and to prepare it for usage. Therefore, cost of land is calculated as below:
Cost of land = Purchase price +Removal of shed+filling and grading-salvage value of shed+broker commission+closing costs
Cost of land = $77,000+$300+$1,500-$120+$1,130+$560
Cost of land = $80,370
So, cost of land is $80,370 therefore option (d) is correct.
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