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OverLord2011
4 days ago
9

Harborfront Interiors, a retailer, pays $125 for an area rug.The original selling price was $170, but it was marked down 30%.

Business
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Lopez Sales Company had the following balances in its accounts on January 1, 2018: Cash$68,000 Merchandise Inventory 48,000 Land
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Answer:

Lopez Sales Company

1. The gross margin recorded by Lopez is as follows:

Sales total = $81,600

Deducting cost of sales = $38,400

Gross Margin = $43,200

2. The gain on the land sale recognized by Lopez amounts to:

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a) The gross margin represents the difference between the selling price and the cost price of a good. It indicates profit prior to accounting for operational expenses to determine net income or margin.

It gauges whether the business can generate sufficient income to meet typical operating costs such as rent, utilities, and employee wages.

b) The gain from the sale of any capital asset is the difference between the selling price and the book value (cost). Such a gain is separately presented in the income statement and may be subject to capital gains tax.

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