Santos Company Allows a Liberal Return Privilege on Its Normal

question 68

Multiple Choice

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

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Definitions:

Cultural Prevalence

The extent to which a particular cultural practice, belief, or value is widespread within a society or cultural group.

Perceived Risk

An individual's assessment of how likely they believe they are to be harmed by a hazard.

Alcoholic Beverages

Drinks containing ethanol, commonly known as alcohol, consumed for recreational and social purposes.

Saturated Fats

Fats that are solid at room temperature, commonly found in animal products and some plant oils, and associated with increased risk of heart disease.