Question

Lew Co. sold 200,000 corrugated boxes for $2 each. Lew’s cost was $1 per unit. The sales agreement gave the customer the right to return up to 60% of the boxes within the first 6 months, provided an appropriate reason was given. It was reasonably estimated that 5% of the boxes would be returned. Lew expects an additional $3,000 of costs to recover those boxes. What amount should Lew report as gross profit from this transaction?

Answer 1

Answer:

It will report gross profit for   177,000 dollars

Explanation:

the rgoss profit is calculate using the net sales figure os the returns should be deducted:

expected return: 5% of 400,000  20,000

additional cost                                  3,000

sales return provision:                   23,000

net sales      400,000 - 23,000 = 377,000

net sales          377,000

COGS              200,000

gross profit       177,000