Blossom Company sold $400,000 of merchandise, returned $20,000, and received a $380,000 payment from Crane Co.
How is that so?
Summary of Effects
- Sales Revenue: Increased by $400,000 and therefore decreased by $20,000 on account of the return, resulting in a net increase of $380,000.
- Cost of Goods Sold out: Increased by $264,000 and before decreased by $12,800 due to the return, happening in a net increase of $251,200.
- Gross Profit: $380,000 (Transactions Revenue) - $251,200 (Cost of Goods Convinced) = $128,800.
- Accounts Due: Increased to $400,000 after the auction, decreased to $380,000 following in position or time the return, and finally settled to $0 following in position or time receiving fee.
- Inventory: Decreased by $264,000 on account of the initial selling and increased by $12,800 due to the return.
Complete question below:
The following transactions are for Blossom Company.
1. On December 3, Blossom Company sold $400,000 of merchandise to Crane Co. on account. The cost of the merchandise sold was $264,000.
2. On December 8, Crane Co. returned $20,000 of merchandise purchased on December 3. The cost of the goods was $12,800.
3. On December 13, Blossom Company received the balance due from Crane Co.
What are the effects of the transactions?