Exam 1 Equations

Net sales =

Sales revenue − Sales returns and allowances

Gross Profit =

Net sales − Cost of goods sold

COGS =

Beginning inventory + Net purchases + Freight-in − Ending inventory

Net Purchases

Purchases − Purchase returns and allowances

Working Capital Equation

= Current assets - current liability

Net Realizable Equation

= Sales price - estimated cost of completion and disposal

LCM: Net realizable value or ceiling

= sales price - estimated cost of completion and disposal

Profit margin =

net income / sales

Gross profit rate

= gross profit / sales

Sales (in terms of gross profit)

= GP + COGS

Cost to retail ratio

= cost of goods available for sale / (sum of original retail price of goods + net markups)

Cost EI Equation

= EI (at retail) x cost to retail ratio

Historical Cost Equation

Acquisition price + sales tax

Depreciable Cost =

= cost - salvage value

Actual Interest Cost

loans x rate of interest

Avoidable Interest Cost

= Weighted average accumulated expenditure x interest rate

Notes payable

= prinicple + interest

Interest Equation

principle x rate x time

Weighted Average Accumulated Expenditures

= expenditures x time

Weighted Average Interest Rate

total interest / total principle

Depreciatable Cost

= original cost - salvage value

Partial Gain Approach Equation

= (Cash / (FV + Cash)) x Total Gain

Annual Depreciation

(cost - salvage value) / useful life

Book Value

= cost - accumulated depreciation

Gain/Loss

FV of asset given up - BV

Inventoriable Cost

= direct materials + direct labor + manufacturing costs + freight-in

EI at base year prices

(EI at current prices / current price index) x 100