S6-4 (continued)
Req. 4
The right thing to do is reliably report all information that is relevant to financial
statement users—this is called the full disclosure principle. In this case, top
management of the company will use the division’s income statement to determine the
S6-5
Req. 1
2015 2014 2013
Gross Sales $400,000 $400,000 $400,000
S6-5 (continued)
Req. 2
1) The gross profit percentage for Merchandise Mavens Corporation (MMC) has
declined from 15.9% to 10.0% to 3.8% over the last three years (see calculations in
2) Sales returns and allowances have grown dramatically in the most recent year,
S6–6
S6–6 (Continued)
Req. 2
Req. 3
CC6–1
Req. 1
Aug. 2
Accounts Receivable ………………………………………………...
1,000
Sales Revenue ……………………………………………………..
1,000
Cost of Goods Sold …………………………………………………...
650
Inventory ……………………………………………………………..
650
Aug. 3
Accounts Receivable ………………………………………………...
500
Sales Revenue …………………………………………………….
500
Cost of Goods Sold …………………………………………………...
400
Inventory ……………………………………………………………..
400
Aug. 6
Sales Returns and Allowances ($500 ÷ 5) ……………………..
100
Accounts Receivable …………………………………………….
100
Inventory ($400 ÷ 5) …………………………………………………...
80
Cost of Goods Sold ……………………………………………….
80
Aug. 10
Cash ……………………………………………………………………….
980
Sales Discounts ($1,000 x 2%) …………………………………….
20
Accounts Receivable …………………………………………….
1,000
Aug. 20
Cash ……………………………………………………………………….
300
Sales Revenue …………………………………………………….
300
Cost of Goods Sold …………………………………………………...
96
Inventory ……………………………………………………………..
96
Aug. 22
Cash ($500 – $100) …………………………………………………..
400
Accounts Receivable …………………………………………….
400
CC6–1 (continued)
Req. 2
Sales Revenue ($1,000 + $500 + $300)…………………………. $ 1,800
Sales Discounts………………………………………………………….. 20
CC6-2
2. a (2011 Gross profit = $80,600 – 22,375 = $58,225, so GPP = $58,225/$80,600 =
3. d (Sold two paintings to TEAC: Price = $25,000 each, Cost = $1,000 each, so