Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 57

Recording Sales with Discounts and Returns and Analyzing Gross Profit Percentage
Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected from 2013:
a.

b.

c.

d.

e.

Required:
1. Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.
2. Compute the gross profit percentage (using the formula shown in this chapter).
3. Prepare journal entries to record transactions ( a )-( e ).
4. Hair World is considering a contract to sell merchandise to a hair salon chain for $15,000. This merchandise will cost Hair World $10,000. Would this contract increase (or decrease) Hair World's gross profit and gross profit percentage How should Hair World decide whether to accept the contract