Question

Phillips Sales Company had the following balances in its accounts on January 1, 2014.
Cash .............. $35,000
Merchandise Inventory ...... 25,000
Land .............. 60,000
Common Stock .......... 50,000
Retained Earnings ........ 70,000
Phillips experienced the following events during 2014.
1. Sold merchandise inventory that cost $20,000 for $37,500.
2. Sold land that cost $25,000 for $40,000.

Required
a. Determine the amount of gross margin recognized by Phillips.
b. Determine the amount of the gain on the sale of land recognized by Phillips.
c. Comment on how the gross margin versus the gain will be recognized on the income statement.
d. Comment on how the gross margin versus the gain will be recognized on the statement of cash flows.



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  • CreatedMay 22, 2014
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