Accounting: Revenue and Goods Sold

Topics: Revenue, Generally Accepted Accounting Principles, Cost of goods sold Pages: 3 (576 words) Published: November 27, 2013
Case 1
Answer 1:Company A is small and has a low profile because of low volume of sales and no advertisement expenses. This shows Proprietary Business. Company B is a large and have a high profile because sales value is high and it incurs heavy cost of advertisement expenses. Answer 2:This is possible because the sales of Company B are 3.4 times higher than the sales of Company A, so even the large expenditure doesn’t affect the Net Income. Answer 3:A:= $211686/$415072*100 = 50.99% or Say 51%

B:If Cost of Goods Sold of Company B is 58%.
Than COGS = $240742 and Total Operating Expenses are $149025. Hence $415072-$240742-$149025 = $25305.
Therefore Net Income will be lower by ($54361-$25305) = $29056.

Case 2

Answer 1:Cost of Goods Sold (50% of $110000) = $55000.

Answer 2:The most likely reason for the high figure for cost of goods sold is that purchases are made in excess. It means that if the purchases are made at $54500 than the level of cost of goods sold may be achieved.

Answer 3:
Sales
Cost of goods Sold
Opening Inventory
Purchases
Less Closing Stock
Gross Profit
Operating Expenses
Net Income

$36500
$54500
$36000
$110000

$55000
$55000
$29000
$26000

Answer 4:The Owner can prevent irregularities by the following ways:- Keep checking the Ratios at small interval of time.
Taking Bank Reconciliation Statement.
Matching the Revenue with Expenses.
Take Consistency in method of recording the transaction.

Case 3
Answer 1:Yes Lequita Adkins is a clever business person because Firstly she took a grace period of 90 days from 30 days, thereafter on final payment she also took 2% cash discount if the payment is made at once. Answer 2:Yes Lequita’s policy an ethical one because business ethics says to reduce and minimize the cost, So that profit of the business may be increased. Answer 3:$200,000*2% = $4,000. i.e. Four Thousand Dollars only. Answer 4:Yes Lequita is correct when she...
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