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Q4-9BTN

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Financial & Managerial Accounting
Found in: Page 223
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

BTN 4-9 Samsung (Samsung.com), Apple, and Google are competitors in the global marketplace. Key comparative figures for each company follow.

Net sales

Cost of sales

Samsung

W200,653,482

W123,482,118

Apple

$233,715

$140,089

Google

$74,989

$28,164

* Millions of Korean won for Samsung.

* Millions of dollars for Apple and Google.

Required

1. Rank the three companies (highest to lowest) based on the gross margin ratio.

2. Which of the companies uses a multiple-step income statement format? (These companies’ income statements are in Appendix A.)

Answer

1. Companies’ ranking:

Ranking

Company

1

Google

2

Apple

3

Samsung

2. Apple and Samsung are using multi-step income statements.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of Income Statement

The statement prepared by the accountant representing the net benefits generated by the business entity by reporting the expenses and the revenue of the business is known as the income statement.

Step 2: Ranking (based on gross margin ratio)

Gross margin:

Particulars

Samsung

Apple

Google

Net sales

W200,653,482

$233,715

$74,989

Less: Cost of sales

(W123,482,118)

(140,089)

(28,164)

Gross Margin

W77,171,364

$93,626

$46,825

Gross margin ratio:

Year

Gross margin

/

Sales

X

100

=

Gross margin ratio

Samsung

W77,171,364

/

W200,653,482

X

100

=

38.46%

Apple

$93,626

/

$233,715

X

100

=

40.05%

Google

$46,825

/

$74,989

X

100

=

62.44%

Step 3: Companies using multi-step income statement

Apple and Samsung are using multi-step income statements.

Most popular questions for Business-studies Textbooks

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

July 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated July 1.

2 Sold merchandise to Creek Co. for $900 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 2. The merchandise had cost $500.

3 Paid $125 cash for freight charges on the purchase of July 1.

8 Sold merchandise that had cost $1,300 for $1,700 cash.

9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2∕15, n∕60, FOB destination, invoice dated July 9.

11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.

12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.

16 Paid the balance due to Boden Company within the discount period.

19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated July 19.

21 Issued a $100 credit memorandum to Art Co. for an allowance on goods sold on July 19.

24 Paid Leight Co. the balance due, net of discount.

30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.

31 Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 31.

Prepare journal entries to record the following merchandising transactions of Menards, which applies the perpetual inventory system and gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 in Accounts Payable—OLB.)

July 3 Purchased merchandise from OLB Corp. for $15,000 under credit terms of 1∕10, n∕30, FOB destination, invoice dated July 3.

7 Sold merchandise to Brill Co. for $11,500 under credit terms of 2∕10, n∕60, FOB destination, invoice dated July 7. The merchandise had cost $7,750.

10 Purchased merchandise from Rupert Co. for $14,200 under credit terms of 1∕10, n∕45, FOB shipping point, invoice dated July 10.

11 Paid $300 cash for shipping charges related to the July 7 sale to Brill Co.

12 Brill returned merchandise from the July 7 sale that had cost Menards $1,450 and been sold for $2,000. The merchandise was restored to inventory.

14 After negotiations with Rupert Co. concerning problems with the merchandise purchased on July 10, Menards received a credit memorandum from Rupert granting a price reduction of $1,200.

15 At OLB’s request, Menards paid $200 cash for freight charges on the July 3 purchase, reducing the amount owed to OLB.

17 Received balance due from Brill Co. for the July 7 sale less the return on July 12.

20 Paid the amount due Rupert Co. for the July 10 purchase less the price reduction granted on July 14.

21 Sold merchandise to Brown for $11,000 under credit terms of 1∕10, n∕30, FOB shipping point, invoice dated July 21. The merchandise had cost $7,000.

24 Brown requested a price reduction on the July 21 sale because the merchandise did not meet specifications. Menards sent Brown a credit memorandum for $1,000 toward the $11,000 invoice to resolve the issue.

30 Received Brown’s cash payment for the amount due from the July 21 sale less the price allowance from July 24.

31 Paid OLB Corp. the amount due from the July 3 purchase.

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