Question

Rains Company is a furniture retailer. On January 14, 2022, Rains purchased merchandise inventory at a cost of $58000. Credit terms were 2/10, n/30. The inventory was sold on account for $170000 on January 21, 2022. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2022, and the accounts receivables were settled on January 30, 2022. Which statement is correct?

There is not enough information available to answer this question.

Cash flows were affected on January 14 and January 21.

Gross profit percentage is 60%.

On January 30, 2022, customers should remit cash in the amount of $168300.

Rains Company is a furniture retailer. On January 14, 2022, Rains purchased merchandise inventory at a cost of $58000. Credit terms were 2/10, n/30. The inventory was sold on account for $170000 on January 21, 2022. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2022, and the accounts receivables were settled on January 30, 2022. Which statement is correct?

There is not enough information available to answer this question.

Cash flows were affected on January 14 and January 21.

Gross profit percentage is 60%.

On January 30, 2022, customers should remit cash in the amount of $168300.

Financial information is presented below:

Operating expenses $ 26000
Sales revenue 238000
Cost of goods sold 147000

The gross profit rate would be

0.11.

0.27.

0.62.

0.38.

Financial information is presented below:

Operating expenses $ 28000
Sales revenue 214000
Cost of goods sold 139000

The profit margin would be

0.22.

0.35.

0.65.

0.78.

Financial information is presented below:

Operating expenses $ 20000
Sales returns and allowances 5000
Sales discounts 3000
Sales revenue 140000
Cost of goods sold 85000

The profit margin ratio would be

0.34.

0.20.

0.19.

0.36.

Answer 1

On January 30, 2022, customers should remit cash in the amount of $168300. This is the correct statement for the Rains company.

Step-by-step explanation:

a.Cash flows were affected on January 14 and January 21. This statement is wrong because cash flows are affected when the actual payment or receipt of cash is involved.

b.Gross profit percentage is 60%. this is even wrong because on calculation the Gross profit percentage is above 65%.

Gross profit percentage= ( Gross profit / Sales ) * 100

= ($ 170,000-58,000/ 170000 )*100= (112,000/ 170000 )*100= 65.88%

c.On January 30, 2022, customers should remit cash in the amount of $168300. This is correct because applying 1% discount on $ 170,000 gives

1% of $ 170,000= $ 1,700

Subtracting this amount from actual = $ 170,000- $ 1700= $ 168,300

2.a. Gross profit rate= ( Gross profit / Sales )

Gross profit rate= (Sales-COGS / Sales )

= (238000 -147000/ 238000)= 0.38

2.b. Profit margin= ( Gross profit / Sales )

Profit margin= (Sales-COGS / Sales )

= (214000 -139000/ 214000)= 0.35

2.c. Profit margin= ( Gross profit / Sales )

Net Sales = Sales revenue -Sales returns and allowances -Sales discounts

Net Sales = 140000- 5000- 3000= 132,000

Profit margin= (Sales-COGS / Sales )

= (132000 -85000/ 132000)= 0.3566= 0.36