On July 1, 2013, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2014. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.

On July 1, 2013, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2014. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.

The following merchandise transactions occurred during December for two different companies: Rippen and Burnen. Both companies use a perpetual inventory system. On December 3, Rippen Corporation sold merchandise on account to Burnen Corp. for $487,000, terms 3/10, n/30. This merchandise originally cost Rippen $308,000.

The following merchandise transactions occurred during December for two different companies: Rippen and Burnen. Both companies use a perpetual inventory system. On December 3, Rippen Corporation sold merchandise on account to Burnen Corp. for $487,000, terms 3/10, n/30. This merchandise originally cost Rippen $308,000. On December 8, Burnen Corp. returned merchandise to Rippen Corporation for a credit of $3,300. Rippen returned this merchandise to inventory at its original cost of $2,087. December 12, Burnen Corp. paid Rippen Corporation for the amount owed.

 

Required:

(a)	Prepare the journal entries to record these transactions on the books of Rippen Corporation. (Omit the "$" sign in your response.)

 

Date	General Journal	Debit	Credit
Dec. 3	Accounts receivable
	Sales revenue
	Cost of goods sold
	Inventory
Dec. 8	Sales returns & allowances
	Accounts receivable
	Inventory
	Cost of goods sold
Dec. 12	Cash
	Sales discounts
	Accounts receivable

(b)	What is the amount of net sales to be reported on Rippen Corporation's income statement? (Omit the "$" sign in your response.)

 

Net sales

$

(c)	What is the Rippen Corporation's gross profit percentage? (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the "%" sign in your response.)

 

Gross profit

%

Explanation:

(b)

Sales Revenue – Sales returns & allowances – Sales discounts = Net Sales

$487,000 – $3,300 – $14,511 = $469,189

(c)

Net sales – Cost of goods sold = Gross profit

$469,189 – $305,913 = $163,276

Gross profit/Net sales = Gross profit %

$163,276 / $469,189 = 34.80% (rounded)