CP6-3 Recording Cash Sales, Credit Sales, Sales Returns, and Sales Allowances and Analyzing

Gross Profit Percentage Campus Stop, Inc., is a student co-op. Campus Stop uses a perpetual inventory system. The follow- ing transactions (summarized) have been selected for analysis:

a. Sold merchandise for cash (cost of merchandise $152,070).	$275,000
b. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $800).	$1,600
c. Sold merchandise (costing $9,000) to a customer on account with terms n/30.	$20,000
d. Collected half of the balance owed by the customer in (c).	$10,000
e. Granted a partial allowance relating to credit sales the customer in (c)had not yet paid.	$1,800

Required:

1. Compute Net Sales and Gross Profit for Campus Stop. No additional sales returns/allowances are expected.

2. Compute the gross profit percentage (using the formula shown in this chapter and rounding to one decimal place).

3. Prepare journal entries to record transactions (a)(e).

4. Campus Stop is considering a contract to sell merchandise to a campus organization for $15,000. This merchandise will cost Campus Stop $12,000. Would this contract increase (or decrease) Campus Stops dollars of gross profit and its gross profit percentage (round to one decimal place)?

(TIP: The impact on gross profit dollars may differ from the impact on gross profit percentage)