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- January 28, 2018 at 8:31 am
Sasha has prepared draft income statement for her business
Opening inventory 13400$
Closing inventory 14200$
Gross profit 144200$
Net profit 36,600$
Sasha has not yet recorded the following items:
Carriage in of 2300$
Discounts received of 3900$
Discounts allowed of 1950$
After these amounts are recorded,what are the revised gross and net profits of Sasha’s business?
(after record)Sales= 256800$(sales)-1950$ (discount allowed) =254850$
(after record)Purchases=145000$(purchases)+2300$(carriage in)-3900$ (discount received)=143400$
In this case:
(after records)Gross profit=254850$-(13400$+143400$-14200$)=112250$
(after records)net profit=112250$-76000$=36250$
My solution and ANSWERS are correct??
Because answers of variants are so
Gross Profit Net profit
Here,there is not correct anwer which l determineJanuary 28, 2018 at 10:22 am
You have mistyped the question (or there is a typing mistake in your book).
The draft gross profit is not 144,200 (that is the cost of goods sold). The draft gross profit is 112,600.
Also, you have headed up your question ‘trade discounts’. The discounts here cannot be trade discounts because trade discounts are not recorded separately. They can only be discounts for early payment.
These discounts allowed and received do not affect the gross profit. They affect the net profit.
Only carriage inwards affects the gross profit (and obviously the net profit as well).
So the correct gross profit is 112,600 – 2,300 = 110,300.
The correct net profit is 36,600 – 2,300 – 1,950 + 3,900 = 36,250
Why are you attempting questions for which you do not have answers? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and workings 🙂January 29, 2018 at 6:31 am
Thank you for reply
?n that case, are these settlement (cash)discounts?January 29, 2018 at 7:33 am
Yes – they are settlement discounts (discounts for early payment). It is only settlement discounts that are recorded separately.
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