Santos Company Allows a Liberal Return Privilege on Its Normal

Santos Company allows a liberal return privilege on its normal sales.Products purchased by customers may be returned within 90 days of purchase if in resalable condition,for a full refund.The following information relates to 2014: Average gross profit percentage 25%
Total sales (including actual returns) $100,000
Actual returns $ 15,000
Historical ratio of actual returns to sales 20%
Sales whose return privilege has expired at
The end of 2014 (does not include actual
Returns) $ 40,000
Assuming that all criteria of SFAS No.48,"Revenue Recognition When Right of Return Exists," are not met,what is the gross margin to be reported by the company in 2014?

A) $4,000
B) $10,000
C) $40,000
D) $2,000

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free