Les Fleurs, a boutique in Paris, France, had the following accounts in its accounting records at December 31, 20X2 (amounts in Euros, denoted as "E")
Purchases………………...
E250,000 Freight In……………… E8,000
Sales discounts…………. 4,000 Purchase returns…….. 7,000
Inventory Sales…………………. 400,000
December 31, 20X1….. 20,000 Purchase discounts…. 3,000
December 31, 20X2….. 30,000 Sales returns…………. 8,000
Compute the following for Les Fleurs during 20X2: (Do not convert the figures to US dollars.)
Net sales revenue
Cost of goods sold
Gross profit
To compute the net sales revenue, cost of goods sold, and gross profit for Les Fleurs during 20X2, we need to understand the formula and calculations involved.
1. Net sales revenue is calculated by deducting sales returns and sales discounts from gross sales. The formula is:
Net Sales Revenue = Gross Sales - Sales Returns - Sales Discounts
2. Cost of goods sold is the cost incurred by the business in purchasing and producing the goods sold during the period. It includes the cost of inventory, freight in, and purchase discounts, minus purchase returns. The formula is:
Cost of Goods Sold = Beginning Inventory + Purchases + Freight In - Purchase Returns - Purchase Discounts - Ending Inventory
3. Gross profit is the difference between net sales revenue and the cost of goods sold. The formula is:
Gross Profit = Net Sales Revenue - Cost of Goods Sold
Now let's calculate each of the values for Les Fleurs during 20X2:
1. Net Sales Revenue:
Gross Sales = 400,000 Euros
Sales Returns = 8,000 Euros
Sales Discounts = 4,000 Euros
Net Sales Revenue = 400,000 - 8,000 - 4,000 = 388,000 Euros
2. Cost of Goods Sold:
Beginning Inventory = 20,000 Euros
Purchases = 250,000 Euros
Freight In = 8,000 Euros
Purchase Returns = 7,000 Euros
Ending Inventory = 30,000 Euros
Purchase Discounts = 3,000 Euros
Cost of Goods Sold = 20,000 + 250,000 + 8,000 - 7,000 - 3,000 - 30,000 = 238,000 Euros
3. Gross Profit:
Gross Profit = Net Sales Revenue - Cost of Goods Sold
Gross Profit = 388,000 - 238,000 = 150,000 Euros
Therefore, the results for Les Fleurs during 20X2 are:
Net sales revenue: 388,000 Euros
Cost of goods sold: 238,000 Euros
Gross profit: 150,000 Euros