Accounting homework

Chapter 5 Homework

Due Week 3 and worth 10 points

Directions: Answer the following four questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your homework assignment using the homework assignment link in the course shell.

E5-1

This information relates to Crisp Co.

1. On April 5, purchased merchandise from Frost Company for $28,000, terms 2/10, n/30.

2. On April 6, paid freight costs of $700 on merchandise purchased from Frost.

3. On April 7, purchased equipment on account for $30,000.

4. On April 8, returned $3,600 of April 5 merchandise to Frost Company.

5. On April 15, paid the amount due to Frost Company in full.

Instructions:

(a) Prepare the journal entries to record the transactions listed above on Crisp Co.’s books. Crisp Co. uses a perpetual inventory system.

(b) Assume that Crisp Co. paid the balance due to Frost Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

E5-7

Financial information is presented here for two companies.

	Yanik Company	Nunez Company
Sales revenue	$90,000	?
Sales returns and allowances	?	$ 5,000
Net sales	84,000	100,000
Cost of goods sold	58,000	?
Gross profit	?	40,000
Operating expenses	14,380	?
Net income	?	17,000

Instructions:

(a) Fill in the missing amounts. Show all computations.

(b) Calculate the profit margin and the gross profit rate for each company.

(c) Discuss your findings in part b.

E5-9

Suppose in its income statement for the year ended June 30, 2014, The Clorox

Company reported the following condensed data (dollars in millions).

Salaries and wages expense	$ 460	Research and development expense	$ 114
Depreciation expense	90	Income tax expense	276
Sales revenue	5,730	Loss on disposal of plant assets	46
Interest expense	161	Cost of goods sold	3,104
Advertising expense	499	Rent expense	105
Sales returns and allowances	280	Utilities expense	60

Instructions:

(a) Prepare a multiple-step income statement.

(b) Calculate the gross profit rate and the profit margin and explain what each means.

(c) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)