Genuine Accessories Inc. is a wholesaler of automobile and truck accessories. Genuine Accessories began operations in November of the current year and engaged in the following transactions dur-ing November and December of this year. Genuine Accessories uses a perpetual inventory system. Nov. 3 Purchased $400,000 of automotive accessories, terms n/30.Nov. 15 Sold $300,000 of automotive accessories, terms n/60. The cost of the accessories soldis $200,000.Nov. 28 Purchased $600,000 of automotive accessories, terms n/45.Dec. 3 Settled the $400,000 purchase of November 3.Dec. 15 Sold $750,000 of automotive accessories, terms n/60. The cost of the accessories soldis $500,000.Dec. 27 Purchased $900,000 of automotive accessories, terms n/30.Instructionsa. Compute the gross profit on Genuine Accessories’s transactions during November andDecember.b. Compute the gross profit on Genuine Accessories’s transactions during November and Decemberif a cash-basis accounting system was used.c. Explain the difference between the results in a and b.
Genuine Accessories Inc. is a wholesaler of automobile and truck accessories. Genuine Accessories
began operations in November of the current year and engaged in the following transactions dur-
ing November and December of this year. Genuine Accessories uses a perpetual inventory system.
Nov. 3 Purchased $400,000 of automotive accessories, terms n/30.
Nov. 15 Sold $300,000 of automotive accessories, terms n/60. The cost of the accessories sold
is $200,000.
Nov. 28 Purchased $600,000 of automotive accessories, terms n/45.
Dec. 3 Settled the $400,000 purchase of November 3.
Dec. 15 Sold $750,000 of automotive accessories, terms n/60. The cost of the accessories sold
is $500,000.
Dec. 27 Purchased $900,000 of automotive accessories, terms n/30.
Instructions
a. Compute the gross profit on Genuine Accessories’s transactions during November and
December.
b. Compute the gross profit on Genuine Accessories’s transactions during November and December
if a cash-basis accounting system was used.
c. Explain the difference between the results in a and b.
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