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  • Principles of Accounting

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    Danish Murad
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    The document contains journal entries for a perpetual inventory system showing sales, purchases, and costs of goods sold on various dates. It also includes an income statement showing net sales, cost of goods sold, and gross profit. Finally, it notes that while the average lumber yard has a gross profit of 26% of $5 million in sales, Tyler's Lumber Co has a higher gross profit of 32% due to offsetting transportation costs with lower costs of goods sold because of its remote location.

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    Solved question of accounting

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    The document contains journal entries for a perpetual inventory system showing sales, purchases, and costs of goods sold on various dates. It also includes an income statement showing net sales, cost of goods sold, and gross profit. Finally, it notes that while the average lumber yard has a gross profit of 26% of $5 million in sales, Tyler's Lumber Co has a higher gross profit of 32% due to offsetting transportation costs with lower costs of goods sold because of its remote location.

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    © All Rights Reserved
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    6 views2 pages

    Principles of Accounting

    Uploaded by

    Danish Murad
    The document contains journal entries for a perpetual inventory system showing sales, purchases, and costs of goods sold on various dates. It also includes an income statement showing net sales, cost of goods sold, and gross profit. Finally, it notes that while the average lumber yard has a gross profit of 26% of $5 million in sales, Tyler's Lumber Co has a higher gross profit of 32% due to offsetting transportation costs with lower costs of goods sold because of its remote location.

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    © All Rights Reserved
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    of 2

    Muhammad Haris Nawaz

    22348
    Problem 5.1

    A) Journal entry according to Perpetual inventory system

    DATE ACCOUNT DEBITED CREDITED


    Nov-5 1)Account receivable 66,950
    Sales 66,950
    2) Cost of goods sold 45,525
    Inventory 45,525
    Nov-9 Inventory 190,000
    Account payable 190,000
    Dec-5 Cash 66,950
    Account receivable 66,950
    Dec-9 Account payable 190,000
    Cash 190,000
    Dec-31 Cost of goods sold 8550
    Inventory 8550

    B) INCOME STATEMENT FOR TYLER’S LUMBER CO.

    Net sales(revenue from sales) 5,124,500


    (LESS)Cost of goods sold 3,484,660
    Gross profit 1,639,840

    C) Question tells us that gross profit of average lumber


    yard is 26% of 5,000,000 that is 1,300,000.
    While on the other hand gross profit of Tyler is 32%
    which is 1,639,840. the cost of transportation
    that incur due to its location is completely
    offset by cost of goods sold. Company is doing
    beneficial operations, and because of its
    remote location company is enjoying
    exceptional increase in profit as compare to
    the profit of other lumber yard.

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