During the current year, merchandise is sold for $315,800 cash and $1,225,000 on account.

During the current year, merchandise is sold for $315,800 cash and $1,225,000 on account. 

The cost of the merchandise sold is $875,000. What is the amount of the gross profit?

Answer:

a. $665,800 ($315,800 + $1,225,000 – $875,000)

For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was $114,800,000.

For the fiscal year, sales were $191,350,000 and the cost of merchandise sold was $114,800,000.

a. What was the amount of gross profit?

b. If total operating expenses were $18,250,000, could you determine net income?

c. Is Customer Refunds Payable an asset, liability, or owner’s equity account, and what is its normal balance?

d. Is Estimated Returns Inventory an asset, liability, or owner’s equity account, and what is its normal balance?

Answer:

a. Gross profit: $76,550,000 ($191,350,000 – $114,800,000)

b. No. There could be other revenue and expense items that affect the amount of net income.

c. Customer Refunds Payable is a liability account with a normal credit balance.

d. Estimated Returns Inventory is an asset account with a normal debit balance.