# CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1

Save this PDF as:

Size: px
Start display at page:

Download "CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1"

## Transcription

1 CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems *1. Identify the differences between service and merchandising companies. *2. Explain the recording of purchases under a perpetual inventory system. 2, 3, , 6, 7, 8 2, 4 2, 3, 4, 10 1A, 2A, 4A 1B, 2B, 4B *3. Explain the recording of sales revenues under a perpetual inventory system. 9, 10, 11 2, 3 3, 4, 5, 10 1A, 2A, 4A 1B, 2B, 4B *4. Explain the steps in the accounting cycle for a merchandising company. 1, 12, 13, 14 5, 6 6, 7, 8 3A, 4A, 8A 3B, 4B, 8B *5. Distinguish between a multiple-step and a singlestep income statement. 18, 19, 20 7, 8, 9 6, 9, 11, 12 2A, 3A, 8A 2B, 3B, 8B *6. Explain the computation and importance of gross profit. 15, 16, 17 9, 11 11, 12 2A, 5A, 6A, 8A 2B, 5B, 6B, 8B 7. Determine cost of goods sold under a periodic system. *8. Explain the recording of purchases and sales under a periodic inventory system. *9. Prepare a worksheet for a merchandising company , 11 13, 14, 15 5A, 6A, 7A 5B, 6B, 7B , 17 7A 7B , 19 8A *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendices to the chapter. 5-1

2 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Journalize purchase and sales transactions under a perpetual inventory system. Simple A Journalize, post, and prepare a partial income statement. Simple A Prepare financial statements and adjusting and closing entries. Moderate A Journalize, post, and prepare a trial balance. Simple A Determine cost of goods sold and gross profit under periodic approach. Moderate A Calculate missing amounts and assess profitability. Moderate *7A Journalize, post, and prepare trial balance and partial income statement using periodic approach. Simple *8A Complete accounting cycle beginning with a worksheet. Moderate B Journalize purchase and sales transactions under a perpetual inventory system. Simple B Journalize, post, and prepare a partial income statement. Simple B Prepare financial statements and adjusting and closing entries. Moderate B Journalize, post, and prepare a trial balance. Simple B Determine cost of goods sold and gross profit under periodic approach. Moderate B Calculate missing amounts and assess profitability. Moderate *7B Journalize, post, and prepare trial balance and partial income statement using periodic approach. Simple

3 BLOOM'S TAXONOMY TABLE 5-3 Correlation Chart between Bloom s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation *1. Identify the differences between service and merchandising companies. Q5-2 Q5-3 Q5-4 E5-1 BE5-1 *2. Explain the recording of purchases under a perpetual inventory system. Q5-5 Q5-6 Q5-7 Q5-8 BE5-2 BE5-4 E5-2 E5-3 E5-4 P5-1A P5-2A P5-4B P5-4A P5-2B P5-1B E5-10 *3. Explain the recording of sales revenues under a perpetual inventory system. Q5-10 Q5-11 BE5-2 BE5-3 E5-3 E5-4 E5-5 P5-1A P5-2A P5-4B P5-2B P5-1B P5-4A E5-10 Q5-9 *4. Explain the steps in the accounting cycle for a merchandising company. Q5-1 Q5-12 Q5-14 Q5-13 BE5-5 BE5-6 E5-6 E5-7 E5-8 P5-4B P5-8A P5-4A P5-3B P5-3A *5. Distinguish between a multiple-step and a singlestep income statement. Q5-18 Q5-19 Q5-20 BE5-8 BE5-7 BE5-9 E5-6 E5-9 E5-11 E5-12 P5-8A P5-2B P5-2A P5-3B P5-3A *6. Explain the computation and importance of gross profit. Q5-17 Q5-15 Q5-16 BE5-9 BE5-11 E5-11 E5-12 P5-2A P5-2B P5-8A P5-5B P5-5A P5-6B P5-6A *7. Determine cost of goods sold under a periodic system. Q5-21 BE5-10 BE5-11 E5-13 E5-15 P5-5A P5-5B P5-7B P5-7A P5-6B P5-6A E5-14 *8. Explain the recording of purchases and sales under a periodic inventory system. Q5-22 BE5-12 E5-16 E5-17 P5-7A P5-7B *9. Prepare a worksheet for a merchandising company. Q5-23 BE5-13 E5-18 E5-19 P5-8A Broadening Your Perspective Communication Financial Reporting the Organization Decision Making Across Comparative Analysis Exploring the Web Organization Across the Decision Making All About You Comparative Analysis Financial Reporting Decision Making Across the Organization Ethics Case

4 ANSWERS TO QUESTIONS 1. (a) Disagree. The steps in the accounting cycle are the same for both a merchandising company and a service company. (b) The measurement of income is conceptually the same. In both types of companies, net income (or loss) results from the matching of expenses with revenues. 2. The normal operating cycle for a merchandising company is likely to be longer than in a service company because inventory must first be purchased and sold, and then the receivables must be collected. 3. (a) The components of revenues and expenses differ as follows: Revenues Expenses Merchandising Sales Cost of Goods Sold and Operating Service Fees, Rents, etc. Operating (only) (b) The income measurement process is as follows: Sales Revenue Less Cost of Goods Sold Equals Gross Profit Less Operating Expenses Equals Net Income 4. Income measurement for a merchandising company differs from a service company as follows: (a) sales are the primary source of revenue and (b) expenses are divided into two main categories: cost of goods sold and operating expenses. 5. In a perpetual inventory system, cost of goods sold is determined each time a sale occurs. 6. The letters FOB mean Free on Board. FOB shipping point means that goods are placed free on board the carrier by the seller. The buyer then pays the freight and debits Merchandise Inventory. FOB destination means that the goods are placed free on board to the buyer s place of business. Thus, the seller pays the freight and debits Freight-out. 7. Credit terms of 2/10, n/30 mean that a 2% cash discount may be taken if payment is made within 10 days of the invoice date; otherwise, the invoice price, less any returns, is due 30 days from the invoice date. 8. July 24 Accounts Payable (\$2,000 \$200)... 1,800 Merchandise Inventory (\$1,800 X 2%) Cash (\$1,800 \$36)... 1, Agree. In accordance with the revenue recognition principle, sales revenues are generally considered to be earned when the goods are transferred from the seller to the buyer; that is, when the exchange transaction occurs. The earning of revenue is not dependent on the collection of credit sales. 10. (a) The primary source documents are: (1) cash sales cash register tapes and (2) credit sales sales invoice. 5-4

5 Questions Chapter 5 (Continued) (b) The entries are: Debit Credit Cash sales Cash... Sales... Cost of Goods Sold... Merchandise Inventory... XX XX XX XX Credit sales Accounts Receivable... Sales... Cost of Goods Sold... Merchandise Inventory... XX XX XX XX 11. July 19 Cash (\$800 \$16) Sales Discounts (\$800 X 2%) Accounts Receivable (\$900 \$100) The perpetual inventory records for merchandise inventory may be incorrect due to a variety of causes such as recording errors, theft, or waste. 13. Two closing entries are required: (1) Sales ,000 Income Summary ,000 (2) Income Summary ,000 Cost of Goods Sold , Of the merchandising accounts, only Merchandise Inventory will appear in the post-closing trial balance. 15. Sales revenues... \$105,000 Cost of goods sold... 70,000 Gross profit... \$ 35,000 Gross profit rate: \$35,000 \$105,000 = 33.3% 16. Gross profit... \$370,000 Less: Net income ,000 Operating expenses... \$130, There are three distinguishing features in the income statement of a merchandising company: (1) a sales revenues section, (2) a cost of goods sold section, and (3) gross profit. 5-5

6 Questions Chapter 5 (Continued) *18. (a) The operating activities part of the income statement has three sections: sales revenues, cost of goods sold, and operating expenses. (b) The nonoperating activities part consists of two sections: other revenues and gains, and other expenses and losses. *19. The functional groupings are selling and administrative. The problem with functional groupings is that some expenses may have to be allocated between the groups. *20. The single-step income statement differs from the multiple-step income statement in that: (1) all data are classified into two categories: revenues and expenses, and (2) only one step, subtracting total expenses from total revenues, is required in determining net income (or net loss). *21. Accounts Purchase Returns and Allowances Purchase Discounts Freight-in Added/Deducted Deducted Deducted Added *22. July 24 Accounts Payable (\$3,000 \$200)... 2,800 Purchase Discounts (\$2,800 X 2%) Cash (\$2,800 \$56)... 2,744 *23. The columns are: (a) Merchandise Inventory Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Balance Sheet (Dr.). (b) Cost of Goods Sold Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Income Statement (Dr.). 5-6

7 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-1 (a) Cost of goods sold = \$45,000 (\$75,000 \$30,000). Operating expenses = \$19,200 (\$30,000 \$10,800). (b) Gross profit = \$38,000 (\$108,000 \$70,000). Operating expenses = \$8,500 (\$38,000 \$29,500). (c) Sales = \$151,500 (\$71,900 + \$79,600). Net income = \$40,100 (\$79,600 \$39,500). BRIEF EXERCISE 5-2 Hollins Company Merchandise Inventory Accounts Payable Gordon Company Accounts Receivable Sales Cost of Goods Sold Merchandise Inventory BRIEF EXERCISE 5-3 (a) Accounts Receivable ,000 Sales ,000 Cost of Goods Sold ,000 Merchandise Inventory ,000 (b) Sales Returns and Allowances...,000 Accounts Receivable...,000 Merchandise Inventory... 90,000 Cost of Goods Sold... 90,

8 BRIEF EXERCISE 5-3 (Continued) (c) Cash (\$780,000 \$15,600) ,400 Sales Discounts (\$780,000 X 2%)... 15,600 Accounts Receivable ,000 (\$900,000 \$,000) BRIEF EXERCISE 5-4 (a) Merchandise Inventory ,000 Accounts Payable ,000 (b) Accounts Payable...,000 Merchandise Inventory...,000 (c) Accounts Payable (\$900,000 \$,000) ,000 Merchandise Inventory... 15,600 (\$780,000 X 2%) Cash (\$780,000 \$15,600) ,400 BRIEF EXERCISE 5-5 Cost of Goods Sold... 1,500 Merchandise Inventory... 1,500 BRIEF EXERCISE 5-6 Sales ,000 Income Summary ,000 Income Summary ,000 Cost of Goods Sold ,000 Sales Discounts... 2,

9 BRIEF EXERCISE 5-7 MAULDER COMPANY Income Statement (Partial) For the Month Ended October 31, 2008 Sales revenues Sales (\$280,000 + \$100,000)... \$380,000 Less: Sales returns and allowances... \$11,000 Sales discounts... 13,000 24,000 Net sales... \$356,000 BRIEF EXERCISE 5-8 As the name suggests, numerous steps are required in determining net income in a multiple-step income statement. In contrast, only one step is required to compute net income in a single-step income statement. A multiplestep statement has five sections whereas a single-step statement has only two sections. The multiple-step statement provides more detail than a singlestep statement, but net income is the same under both statements. Some of the differences in presentation can be seen from the comparative information presented below. (1) Multiple-Step Income Statement a. b. c. Item Gain on sale of equipment Casualty loss from vandalism Cost of goods sold Section Other revenues and gains Other expenses and losses Cost of goods sold (2) Single-Step Income Statement a. b. c. Item Gain on sale of equipment Casualty loss from vandalism Cost of goods sold Revenues Expenses Expenses Section BRIEF EXERCISE 5-9 (a) Net sales = \$510,000 \$15,000 = \$495,000. (b) Gross profit = \$495,000 \$350,000 = \$145,

10 BRIEF EXERCISE 5-9 (Continued) (c) Income from operations = \$145,000 \$70,000 \$40,000 = \$35,000. (d) Gross profit rate = \$145,000 \$495,000 = 29.3%. BRIEF EXERCISE 5-10 Purchases... \$450,000 Less: Purchase returns and allowances... \$11,000 Purchase discounts... 8,000 19,000 Net purchases... \$431,000 Net purchases... \$431,000 Add: Freight-in... 16,000 Cost of goods purchased... \$447,000 BRIEF EXERCISE 5-11 Net sales... \$630,000 Beginning inventory... \$ 60,000 Add: Cost of goods purchased* ,000 Cost of goods available for sale ,000 Ending inventory... 90,000 Cost of goods sold ,000 Gross profit... \$213,000 *Information taken from Brief Exercise *BRIEF EXERCISE 5-12 (a) Purchases... 1,000,000 Accounts Payable... 1,000,000 (b) Accounts Payable ,000 Purchase Returns and Allowances ,000 (c) Accounts Payable (\$1,000,000 \$130,000) ,000 Purchase Discounts (\$870,000 X 2%)... 17,400 Cash (\$870,000 \$17,400) ,

11 *BRIEF EXERCISE 5-13 (a) (b) (c) (d) Cash: Trial balance debit column; Adjusted trial balance debit column; Balance sheet debit column. Merchandise inventory: Trial balance debit column; Adjusted trial balance debit column; Balance sheet debit column. Sales: Trial balance credit column; Adjusted trial balance credit column, Income statement credit column. Cost of goods sold: Trial balance debit column, Adjusted trial balance debit column, Income statement debit column. 5-11

12 SOLUTIONS TO EXERCISES EXERCISE True. 2. False. For merchandising company, sales less cost of goods sold is called gross profit. 3. True. 4. True. 5. False. The operating cycle of a merchandising company differs from that that of a service company. The operating cycle of a merchandising company is ordinarily longer. 6. False. In a periodic inventory system, no detailed inventory records of goods on hand are maintained. 7. True. 8. False. A perpetual inventory system provides better control over inventories than a periodic system. EXERCISE 5-2 (a) (1) April 5 Merchandise Inventory... 25,000 Accounts Payable... 25,000 (2) April 6 Merchandise Inventory Cash (3) April 7 Equipment... 26,000 Accounts Payable... 26,000 (4) April 8 Accounts Payable... 4,000 Merchandise Inventory... 4,000 (5) April 15 Accounts Payable... 21,000 (\$25,000 \$4,000) Merchandise Inventory [(\$25,000 \$4,000) X 2%] Cash (\$21,000 \$420)... 20,580 (b) May 4 Accounts Payable... 21,000 Cash... 21,

13 EXERCISE 5-3 Sept. 6 Merchandise Inventory (80 X \$20)... 1,600 Cash... 1,600 9 Merchandise Inventory Cash Accounts Payable (2 X \$21) Merchandise Inventory Accounts Receivable (26 X \$31) Sales Cost of Goods Sold (26 X \$21) Merchandise Inventory Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold Accounts Receivable (30 X \$31) Sales Cost of Goods Sold (30 X \$21) Merchandise Inventory EXERCISE 5-4 (a) June 10 Merchandise Inventory... 8,000 Accounts Payable... 8, Merchandise Inventory Cash Accounts Payable Merchandise Inventory Accounts Payable (\$8,000 \$300)... 7,700 Merchandise Inventory (\$7,700 X 2%) Cash (\$7,700 \$154)... 7,

14 EXERCISE 5-4 (Continued) (b) June 10 Accounts Receivable... 8,000 Sales... 8,000 Cost of Goods Sold... 5,000 Merchandise Inventory... 5, Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold Cash (\$7,700 \$154)... 7,546 Sales Discounts (\$7,700 X 2%) Accounts Receivable... 7,700 (\$8,000 \$300) EXERCISE 5-5 (a) 1. Dec. 3 Accounts Receivable ,000 Sales ,000 Cost of Goods Sold ,000 Merchandise Inventory , Dec. 8 Sales Returns and Allowances... 27,000 Accounts Receivable... 27, Dec. 13 Cash (\$473,000 \$9,460) ,540 Sales Discounts... 9,460 [(\$500,000 \$27,000) X 2%] Accounts Receivable ,000 (\$500,000 \$27,000) (b) Cash ,000 Accounts Receivable ,000 (\$500,000 \$27,000) 5-14

15 EXERCISE 5-6 (a) ZAMBRANA COMPANY Income Statement (Partial) For the Year Ended October 31, 2008 Sales revenues Sales... \$800,000 Less: Sales returns and allowances... \$25,000 Sales discounts... 15,000 40,000 Net sales... \$760,000 Note: Freight-out is a selling expense. (b) (1) Oct. 31 Sales ,000 Income Summary ,000 (2) 31 Income Summary... 40,000 Sales Returns and Allowances... 25,000 Sales Discounts... 15,000 EXERCISE 5-7 (a) Cost of Goods Sold Merchandise Inventory (b) Sales ,000 Income Summary ,000 Income Summary... 92,800 Cost of Goods Sold... 60,900 Operating Expenses... 29,000 Sales Returns and Allowances... 1,700 Sales Discounts... 1,200 Income Summary (\$108,000 \$92,800)... 15,200 Peter Kalle, Capital... 15,

16 EXERCISE 5-8 (a) Cost of Goods Sold Merchandise Inventory (b) Sales ,000 Income Summary ,000 Income Summary ,600 Cost of goods sold (\$218,000 + \$600) ,600 Freight-out... 7,000 Insurance expense... 12,000 Rent expense... 20,000 Salary expense... 61,000 Sales discounts... 10,000 Sales returns and allowances... 13,000 Income Summary (\$350,000 \$341,600)... 8,400 Rogers, Capital... 8,

17 EXERCISE 5-9 (a) PELE COMPANY Income Statement For the Year Ended December 31, 2008 Net sales... \$2,312,000 Cost of goods sold... 1,289,000 Gross profit... 1,023,000 Operating expenses Selling expenses... \$490,000 Administrative expenses ,000 Total operating expenses ,000 Income from operations... 98,000 Other revenues and gains Interest revenue... 28,000 Other expenses and losses Interest expense... \$70,000 Loss on sale of equipment... 10,000 80,000 52,000 Net income... \$ 46,000 (b) PELE COMPANY Income Statement For the Year Ended December 31, 2008 Revenues Net sales... \$2,312,000 Interest revenue... 28,000 Total revenues... 2,340,000 Expenses Cost of goods sold... \$1,289,000 Selling expenses ,000 Administrative expenses ,000 Interest expense... 70,000 Loss on sale of equipment... 10,000 Total expenses... 2,294,000 Net income... \$ 46,

18 EXERCISE Sales Returns and Allowances Sales Supplies Cash Accounts Payable Merchandise Inventory Sales Discounts Sales Merchandise Inventory Cash Freight-out EXERCISE 5-11 (a) \$900,000 \$540,000 = \$360,000. (b) \$360,000/\$900,000 = 40%. The gross profit rate is generally considered to be more useful than the gross profit amount. The rate expresses a more meaningful (qualitative) relationship between net sales and gross profit. The gross profit rate tells how many cents of each sales dollar go to gross profit. The trend of the gross profit rate is closely watched by financial statement users, and is compared with rates of competitors and with industry averages. Such comparisons provide information about the effectiveness of a company s purchasing function and the soundness of its pricing policies. (c) Income from operations is \$130,000 (\$360,000 \$230,000), and net income is \$119,000 (\$130,000 \$11,000). (d) The amount shown for net income is the same in a multiple-step income statement and a single-step income statement. Both income statements report the same revenues and expenses, but in different order. Therefore, net income in Payton s single-step income statement is also \$119,000. (e) Merchandise inventory is reported as a current asset immediately below accounts receivable. 5-18

19 EXERCISE 5-12 (a) (*missing amount) a. Sales... \$ 90,000) *Sales returns... (6,000) Net sales... \$ 84,000) b. Net sales... \$ 84,000) Cost of goods sold... (56,000) *Gross profit... \$ 28,000) c. Gross profit... \$ 28,000) Operating expenses... (15,000) *Net income... \$ 13,000) d. *Sales... \$105,000) Sales returns... (5,000) Net sales... \$100,000) e. Net sales... \$100,000) *Cost of goods sold... 58,500) Gross profit... \$ 41,500) f. Gross profit... \$ 41,500) *Operating expenses... 26,500) Net income... \$ 15,000) ) (b) Nam Company Gross profit Net sales = \$28,000 \$84,000 = 33.33% Mayo Company Gross profit Net sales = \$41,500 \$100,000 = 41.5% 5-19

20 EXERCISE 5-13 Inventory, September 1, \$ 17,200 Purchases... \$149,000 Less: Purchase returns and allowances... 2,000 Net Purchases ,000 Add: Freight-in... 4,000 Cost of goods purchased ,000 Cost of goods available for sale ,200 Inventory, August 31, ,000 Cost of goods sold... \$143,200 EXERCISE 5-14 (a) Sales... \$800,000 Less: Sales returns and allowances... \$ 10,000 Sales discounts... 5,000 15,000 Net sales ,000 Cost of goods sold Inventory, January ,000 Purchases... \$500,000 Less: Purch. rets. and alls.... (2,000) Purch. discounts... (6,000) 492,000 Add: Freight-in... 4,000 Cost of goods available for sale ,000 Inventory, December (60,000) Cost of goods sold ,000 Gross profit... \$299,000 (b) Gross profit \$299,000 Operating expenses = Net income \$130,000. Operating expenses = \$169,000. EXERCISE 5-15 (a) \$1,560 (\$1,600 \$40) (b) \$1,670 (\$1,560 + \$110) (c) \$1,510 (\$1,820 \$310) (d) \$50 (\$1,080 \$1,030) (e) \$250 (\$1,280 \$1,030) (f) \$ (\$1,350 \$1,230) (g) \$6,500 (\$290 + \$6,210) (h) \$1,730 (\$7,940 \$6,210) (i) \$8,940 (\$1,000 + \$7,940) (j) \$6,200 (\$49,530 \$43,330 from (I)) (k) \$2,500 (\$43,590 \$41,090) (l) \$43,330 (\$41,090 + \$2,240) 5-20

21 *EXERCISE 5-16 (a) 1. April 5 Purchases... 20,000 Accounts Payable... 20, April 6 Freight-in Cash April 7 Equipment... 26,000 Accounts Payable... 26, April 8 Accounts Payable... 2,800 Purchase Returns and Allowances... 2, April 15 Accounts Payable... 17,200 (\$20,000 \$2,800) Purchase Discounts [(\$20,000 \$2,800) X 2%)] Cash (\$17,200 \$344)... 16,856 (b) May 4 Accounts Payable... 17,200 (\$20,000 \$2,800) Cash... 17,200 *EXERCISE 5-17 (a) 1. April 5 Purchases... 22,000 Accounts Payable... 22, April 5 Freight-in Cash April 7 Equipment... 26,000 Accounts Payable... 26, April 8 Accounts Payable... 4,000 Purchase Returns and Allowances... 4,

22 *EXERCISE 5-17 (Continued) 5. April 15 Accounts Payable... 18,000 (\$22,000 \$4,000) Purchase Discounts [(\$22,000 \$4,000) X 2%)] Cash (\$18,000 \$360)... 17,640 (b) May 4 Accounts Payable... 18,000 (\$22,000 \$4,000) Cash... 18,000 *EXERCISE 5-18 Accounts Cash Merchandise Inventory Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit 9,000 76,000 10,000 9, , ,000 10,000 9, , ,000 9,000 76,000 *EXERCISE 5-19 GREEN COMPANY Worksheet For the Month Ended June 30, 2008 Account Titles Trial Balance Adjustments Adj. Trial Balance Income Statement Balance Sheet Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 2,320 2,320 2,320 Accounts Receivable 2,440 2,440 2,440 Merchandise Inventory 11,640 11,640 11,640 Accounts Payable 1, 1,500 2,620 2,620 Ed Green, Capital 3,600 3,600 3,600 Sales 42,400 42,400 42,400 Cost of Goods Sold 20,560 20,560 20,560 Operating Expenses 10,160 1,500 11,660 11,660 Totals 47, 47, 1,500 1,500 48,620 48,620 32,220 42,400 16,400 6,220 Net Income 10,180 10,180 Totals 42,400 42,400 16,400 16,

23 SOLUTIONS TO PROBLEMS PROBLEM 5-1A (a) July 1 Merchandise Inventory (60 X \$30)... 1,800 Accounts Payable... 1,800 3 Accounts Receivable (40 X \$50)... 2,000 Sales... 2,000 Cost of Goods Sold (40 X \$30)... 1,200 Merchandise Inventory... 1,200 9 Accounts Payable... 1,800 Merchandise Inventory (\$1,800 X.02) Cash... 1, Cash... 1,980 Sales Discounts Accounts Receivable... 2, Accounts Receivable (30 X \$50)... 1,500 Sales... 1,500 Cost of Goods Sold (30 X \$30) Merchandise Inventory Merchandise Inventory... 1,700 Accounts Payable... 1,700 Merchandise Inventory Cash Accounts Payable Merchandise Inventory Cash... 1,485 Sales Discounts Accounts Receivable... 1,

24 PROBLEM 5-1A (Continued) July 22 Accounts Receivable (45 X \$50)... 2,250 Sales... 2,250 Cost of Goods Sold (45 X \$30)... 1,350 Merchandise Inventory... 1, Accounts Payable (\$1,700 \$300)... 1,400 Cash... 1, Sales Returns and Allowances (4 X \$50) Accounts Receivable Merchandise Inventory (4 X \$30)... Cost of Goods Sold

25 PROBLEM 5-2A (a) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 2 Merchandise Inventory... 6,900 Accounts Payable ,900 4 Accounts Receivable... Sales... Cost of Goods Sold... Merchandise Inventory ,500 4,100 5,500 4,100 5 Freight-out... Cash Accounts Payable... Merchandise Inventory Accounts Payable (\$6,900 \$500)... Merchandise Inventory... (\$6,400 X 1%) Cash , , Cash... Sales Discounts (\$5,500 X 1%)... Accounts Receivable , , Merchandise Inventory... Cash ,800 3, Cash... Merchandise Inventory Merchandise Inventory... Accounts Payable ,500 4, Merchandise Inventory... Cash

26 PROBLEM 5-2A (Continued) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 23 Cash... Sales... Cost of Goods Sold... Merchandise Inventory ,400 5, 6,400 5, 26 Merchandise Inventory... Cash ,300 2, Accounts Payable... Merchandise Inventory... (\$4,500 X 2%) Cash , , Sales Returns and Allowances... Cash... Merchandise Inventory... Cost of Goods Sold Accounts Receivable... Sales... Cost of Goods Sold... Merchandise Inventory ,700 2,800 3,700 2,

27 PROBLEM 5-2A (Continued) (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance Apr. 1 Balance 9, ,336 8,760 2, ,445 7, ,800 4, , , ,400 10, ,300 4, ,569 4,159 4,069 Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance Apr. 4 5,500 5, , ,700 3,700 Merchandise Inventory No. Date Explanation Ref. Debit Credit Balance Apr. 2 6,900 6, , ,800 2,300 2, ,800 6, , , ,036 10, , 5, ,300 7, , , ,800 4,

28 PROBLEM 5-2A (Continued) Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance Apr. 2 6,900 6, ,400 6, ,500 4, ,500 0 M. Olaf, Capital No. 301 Date Explanation Ref. Debit Credit Balance Apr. 1 Balance 9,000 Sales No. 401 Date Explanation Ref. Debit Credit Balance Apr ,500 6,400 3,700 5,500 11,900 15,600 Sales Returns and Allowances No. 412 Date Explanation Ref. Debit Credit Balance Apr Sales Discounts No. 414 Date Explanation Ref. Debit Credit Balance Apr Cost of Goods Sold No. 505 Date Explanation Ref. Debit Credit Balance Apr ,100 5, 4,100 9, , ,800 11,

29 PROBLEM 5-2A (Continued) Freight-out No. 644 Date Explanation Ref. Debit Credit Balance Apr (c) OLAF DISTRIBUTING COMPANY Income Statement (Partial) For the Month Ended April 30, 2008 Sales revenues Sales... \$15,600 Less: Sales returns and allowances... \$90 Sales discounts Net sales... 15,455 Cost of goods sold... 11,990 Gross profit... \$ 3,

30 PROBLEM 5-3A (a) MAINE DEPARTMENT STORE Income Statement For the Year Ended December 31, 2008 Sales revenues Sales... \$628,000 Less: Sales returns and allowances... 8,000 Net sales ,000 Cost of goods sold ,700 Gross profit ,300 Operating expenses Selling expenses Sales salaries expense... \$76,000 Sales commissions expense... 14,500 Depr. expense equipment... 13,300 Utilities expense (\$12,000 X 60%)... 7,200 Insurance expense (\$7,200 X 60%)... 4,320 Total selling expenses... \$115,320 Administrative expenses Office salaries expense... 32,000 Depr. expense building... 10,400 Property tax expense... 4,800 Utilities expense (\$12,000 X 40%)... 4,800 Insurance expense (\$7,200 X 40%)... 2,880 Total administrative expenses... 54,880 Total operating expenses ,200 Income from operations... 37,100 Other revenues and gains Interest revenue... 4,000 Other expenses and losses Interest expense... 11,000 7,000 Net income... \$ 30,

31 PROBLEM 5-3A (Continued) MAINE DEPARTMENT STORE Owner s Equity Statement For the Year Ended December 31, 2008 B. Maine, Capital, January 1... \$176,600 Add: Net income... 30, ,700 Less: Drawings... 28,000 B. Maine, Capital, December \$178,700 MAINE DEPARTMENT STORE Balance Sheet December 31, 2008 Assets Current assets Cash... \$ 23,800 Accounts receivable... 50,300 Merchandise inventory... 75,000 Prepaid insurance... 2,400 Total current assets... \$151,500 Property, plant, and equipment Building... \$190,000 Less: Accumulated depreciation building... 52, ,500 Equipment ,000 Less: Accumulated depreciation equipment... 42,900 67, ,600 Total assets... \$356,

32 PROBLEM 5-3A (Continued) MAINE DEPARTMENT STORE Balance Sheet (Continued) December 31, 2008 Liabilities and Owner s Equity Current liabilities Accounts payable... \$ 79,300 Mortgage payable due next year... 20,000 Interest payable... 8,000 Property taxes payable... 4,800 Sales commissions payable... 4,300 Utilities expense payable... 1,000 Total current liabilities... \$117,400 Long-term liabilities Mortgage payable... 60,000 Total liabilities ,400 Owner s equity B. Maine, Capital ,700 Total liabilities and owner s equity... \$356,100 (b) Dec. 31 Depreciation Expense Building... 10,400 Accumulated Depreciation Building... 10, Depreciation Expense Equipment... 13,300 Accumulated Depreciation Equipment... 13, Insurance Expense... 7,200 Prepaid Insurance... 7, Interest Expense... 8,000 Interest Payable... 8, Property Tax Expense... 4,800 Property Taxes Payable... 4,

33 PROBLEM 5-3A (Continued) 31 Sales Commissions Expense... 4,300 Sales Commissions Payable... 4, Utilities Expense... 1,000 Utilities Expense Payable... 1,000 (c) Dec. 31 Sales ,000 Interest Revenue... 4,000 Income Summary , Income Summary ,900 Sales Returns and Allowances... 8,000 Cost of Goods Sold ,700 Office Salaries Expense... 32,000 Sales Salaries Expense... 76,000 Sales Commissions Expense... 14,500 Property Tax Expense... 4,800 Utilities Expense... 12,000 Depreciation Expense Building... 10,400 Depreciation Expense Equipment... 13,300 Insurance Expense... 7,200 Interest Expense... 11, Income Summary... 30,100 B. Maine, Capital... 30, B. Maine, Capital... 28,000 B. Maine, Drawing... 28,

34 PROBLEM 5-4A (a) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 4 Merchandise Inventory Accounts Payable Merchandise Inventory... Cash Accounts Receivable... Sales ,150 1,150 Cost of Goods Sold... Merchandise Inventory Accounts Payable... Merchandise Inventory Merchandise Inventory... Cash Accounts Payable (\$840 \$40)... Merchandise Inventory... (\$800 X 2%) Cash Merchandise Inventory... Accounts Payable Cash... Merchandise Inventory Merchandise Inventory... Cash Accounts Receivable... Sales Cost of Goods Sold... Merchandise Inventory

35 PROBLEM 5-4A (Continued) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 20 Cash Accounts Receivable Accounts Payable... Merchandise Inventory... (\$900 X 3%) Cash Sales Returns and Allowances... Accounts Receivable Cash... Accounts Receivable (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance Apr Balance ,500 2,460 2,040 1,256 1,306 1,276 1, ,563 Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance Apr , ,150 1, ,460 1,

36 PROBLEM 5-4A (Continued) Merchandise Inventory No. Date Explanation Ref. Debit Credit Balance Apr Balance ,700 2,540 2,580 1,790 1,750 2,170 2,154 3,054 3,004 3,034 2,504 2,477 Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance Apr J. Hafner, Capital No. 301 Date Explanation Ref. Debit Credit Balance Apr. 1 Balance 4,200 Sales No. 401 Date Explanation Ref. Debit Credit Balance Apr , ,150 1,

37 PROBLEM 5-4A (Continued) Sales Returns and Allowances No. 412 Date Explanation Ref. Debit Credit Balance Apr Cost of Goods Sold No. 505 Date Explanation Ref. Debit Credit Balance Apr ,320 (c) HAFNER S TENNIS SHOP Trial Balance April 30, 2008 Cash... Accounts Receivable... Merchandise Inventory... J. Hafner, Capital... Sales... Sales Returns and Allowances... Cost of Goods Sold... Debit \$1, , ,320 \$6,160 Credit \$4,200 1,960 \$6,

38 PROBLEM 5-5A GORDMAN DEPARTMENT STORE Income Statement (Partial) For the Year Ended December 31, 2008 Sales revenues Sales... \$718,000 Less: Sales returns and allowances... 8,000 Net sales ,000 Cost of goods sold Inventory, January 1... \$ 40,500 Purchases... \$447,000 Less: Purchase returns and allowances \$ 6,400 Purchase discounts... 12,000 18,400 Net purchases ,600 Add: Freight-in... 5,600 Cost of goods purchased ,200 Cost of goods available for sale ,700 Inventory, December ,000 Cost of goods sold ,700 Gross profit... \$310,

39 PROBLEM 5-6A (a) Cost of goods sold: Beginning inventory Plus: Purchases Cost of goods available Less: Ending inventory Cost of goods sold \$ 13, , ,000 (11,300) \$147,700 \$ 11, , ,300 (14,700) \$141,600 \$ 14, , ,700 (12,200) \$131,500 (b) Sales Less: CGS Gross profit \$227, ,600 \$ 86,000 \$225, ,700 \$ 78,000 \$219, ,500 \$ 88,000 (c) Beginning accounts payable Plus: Purchases Less: Payments to suppliers Ending accounts payable \$ 31, , ,000 \$ 15,000 \$ 20, , ,000 \$ 31,000 \$ 15, , ,000 \$ 17,000 (d) Gross profit rate % % % 1 \$78,000 \$225,700 2 \$86,000 \$227,600 3 \$88,000 \$219,500 No. Even though sales declined in 2008 from each of the two prior years, the gross profit rate increased. This means that cost of goods sold declined more than sales did, reflecting better purchasing power or control of costs. Therefore, in spite of declining sales, profitability, as measured by the gross profit rate, actually improved. 5-39

40 *PROBLEM 5-7A (a) General Journal Date Account Titles and Explanation Debit Credit Apr. 4 Purchases Accounts Payable Freight-in... Cash... 8 Accounts Receivable... Sales Accounts Payable... Purchase Returns and Allowances Purchases... Cash Accounts Payable (\$740 \$40)... Purchase Discount (\$700 X 3%)... Cash Purchases... Accounts Payable Cash... Purchase Returns and Allowances Freight-in... Cash Accounts Receivable... Sales Cash... Accounts Receivable Accounts Payable... Purchase Discounts (\$600 X 2%)... Cash , ,

41 *PROBLEM 5-7A (Continued) Date Account Titles and Explanation Debit Credit Apr. 27 Sales Returns and Allowances Accounts Receivable Cash... Accounts Receivable (b) 4/1 Bal. 2,500 4/ / / Cash 4/6 60 4/ / / / / / / Accounts Payable 4/ / /30 Bal. 0 4/30 Bal. 1,893 Angie Wilbert, Capital 4/1 Bal. 4,200 Accounts Receivable 4/30 Bal. 4,200 4/ /18 1,000 4/ /27 30 Sales 4/ / /30 Bal /18 1,000 4/30 Bal. 1,900 Merchandise Inventory 4/1 Bal. 1,700 Purchase Discounts 4/30 Bal. 1,700 4/ /21 12 Sales Returns and Allowances 4/30 Bal. 33 4/ /30 Bal. 30 Freight-in 4/6 60 Purchases 4/ / / / /30 Bal. 1,640 Purchase Returns and Allowances 4/ / /30 Bal. 90 4/30 Bal

42 *PROBLEM 5-7A (Continued) (c) VILLAGE TENNIS SHOP Trial Balance April 30, 2008 Cash... Accounts Receivable... Merchandise Inventory... Angie Wilbert, Capital... Sales... Sales Returns and Allowances... Purchases... Purchase Returns and Allowances... Purchase Discounts... Freight-in... VILLAGE TENNIS SHOP Income Statement (Partial) For the Month Ended April 30, 2008 Debit \$1, , , \$6,223 Credit \$4,200 1, \$6,223 Sales revenues Sales... \$1,900 Less: Sales returns and allowances Net sales... 1,870 Cost of goods sold Inventory, April 1... \$1,700 Purchases... \$1,640 Less: Purchase returns... \$90 and allowances... Purchase discounts Net purchases... 1,517 Add: Freight-in Cost of goods purchased... 1,607 Cost of goods available for sale... 3,307 Inventory, April ,296 Cost of goods sold... 1,011 Gross profit... \$

43 *PROBLEM 5-8A 5-43 (a) TERRY MANNING FASHION CENTER Worksheet For the Year Ended November 30, 2008 Account Titles Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash Accounts Receivable Merchandise Inventory Store Supplies Store Equipment Accum. Depreciation Store Equipment Delivery Equipment Accum. Depreciation Delivery Equipment Notes Payable Accounts Payable T. Manning, Capital T. Manning, Drawing Sales Sales Returns and Allowances Cost of Goods Sold Salaries Expense Advertising Expense Utilities Expense Repair Expense Delivery Expense Rent Expense Totals Store Supplies Expense Depreciation Expense Store Equipment Depreciation Expense Delivery Equipment Interest Expense Interest Payable Totals Net Loss Totals 28,700 30,700 44,700 6,200 85,000 48,000 12,000 8, , ,000 24,400 14,000 12,100 16,700 24, ,700 22,000 6,000 51,000 48, , , ,700 (e) 300 (a) 3,700 (b) 9,000 (c) 5,000 (d) 4,080 22,080 (e) 300 (a) 3,700 (b) 9,000 (c) 5,000 (d) 4,080 22,080 28,700 30,700 44,400 2,500 85,000 48,000 12,000 8, , ,000 24,400 14,000 12,100 16,700 24,000 3,700 9,000 5,000 4,080 1,010,780 31,000 11,000 51,000 48, , ,200 4,080 1,010,780 8, , ,000 24,400 14,000 12,100 16,700 24,000 3,700 9,000 5,000 4, , , , ,200 4, ,480 28,700 30,700 44,400 2,500 85,000 48,000 12, ,300 4, ,580 31,000 11,000 51,000 48, ,000 4, , ,580 Key: (a) Store supplies used, (b) Depreciation expense store equipment, (c) Depreciation expense delivery equipment, (d) Accrued interest payable, (e) Adjustment of inventory.

44 *PROBLEM 5-8A (Continued) (b) TERRY MANNING FASHION CENTER Income Statement For the Year Ended November 30, 2008 Sales revenues Sales... \$755,200 Less: Sales returns and allowances... 8,800 Net sales ,400 Cost of goods sold ,700 Gross profit ,700 Operating expenses Selling expenses Salaries expense... \$98,000 (\$140,000 X 70%) Advertising expense... 24,400 Rent expense (\$24,000 X 80%)... 19,200 Delivery expense... 16,700 Utilities expense... 11,200 (\$14,000 X 80%) Depreciation expense store equipment... 9,000 Depreciation expense delivery equipment... 5,000 Store supplies expense... 3,700 Total selling expenses... \$187,200 Administrative expenses Salaries expense... 42,000 (\$140,000 X 30%) Repair expense... 12,100 Rent expense (\$24,000 X 20%)... 4,800 Utilities expense (\$14,000 X 20%)... 2,800 Total administrative expenses... 61,700 Total operating expenses ,900 Loss from operations... (200) Other expenses and losses Interest expense... 4,080 Net loss... \$ (4,280) 5-44

45 *PROBLEM 5-8A (Continued) TERRY MANNING FASHION CENTER Owner s Equity Statement For the Year Ended November 30, 2008 T. Manning, Capital, December 1, \$110,000 Less: Net loss... \$ 4,280 Drawings... 12,000 16,280 T. Manning, Capital, November 30, \$ 93,720 TERRY MANNING FASHION CENTER Balance Sheet November 30, 2008 Assets Current assets Cash... \$28,700 Accounts receivable... 30,700 Merchandise inventory... 44,400 Store supplies... 2,500 Total current assets... \$106,300 Property, plant, and equipment Store equipment... \$85,000 Accumulated depreciation store equipment... 31,000 54,000 Delivery equipment... 48,000 Accumulated depreciation delivery equipment... 11,000 37,000 91,000 Total assets... \$197,

46 *PROBLEM 5-8A (Continued) TERRY MANNING FASHION CENTER Balance Sheet (Continued) November 30, 2008 Liabilities and Owner s Equity Current liabilities Notes payable due next year... \$30,000 Accounts payable... 48,500 Interest payable... 4,080 Total current liabilities... \$ 82,580 Long-term liabilities Notes payable... 21,000 Total liabilities ,580 Owner s equity T. Manning, Capital... 93,720 Total liabilities and owner s equity... \$197,300 (c) Nov. 30 Store Supplies Expense... 3,700 Store Supplies... 3, Depreciation Expense Store Equipment... 9,000 Accumulated Depreciation Store Equipment... 9, Depreciation Expense Delivery Equipment... 5,000 Accumulated Depreciation Delivery Equipment... 5, Interest Expense... 4,080 Interest Payable... 4, Cost of Goods Sold Merchandise Inventory

47 *PROBLEM 5-8A (Continued) (d) Nov. 30 Sales ,200 Income Summary , Income Summary ,480 Sales Returns and Allowances... 8,800 Cost of Goods Sold ,700 Salaries Expense ,000 Advertising Expense... 24,400 Utilities Expense... 14,000 Repair Expense... 12,100 Delivery Expense... 16,700 Rent Expense... 24,000 Store Supplies Expense... 3,700 Depreciation Expense Store Equipment... 9,000 Depreciation Expense Delivery Equipment... 5,000 Interest Expense... 4, T. Manning, Capital... 4,280 Income Summary... 4, T. Manning, Capital... 12,000 T. Manning, Drawing... 12,

48 *PROBLEM 5-8A (Continued) (e) TERRY MANNING FASHION CENTER Post-Closing Trial Balance November 30, 2008 Cash... Accounts Receivable... Merchandise Inventory... Store Supplies... Store Equipment... Accumulated Depreciation Store Equipment... Delivery Equipment... Accumulated Depreciation Delivery Equipment... Notes Payable... Accounts Payable... Interest Payable... T. Manning, Capital... Debit \$ 28,700 30,700 44,400 2,500 85,000 48,000 \$239,300 Credit \$ 31,000 11,000 51,000 48,500 4,080 93,720 \$239,

49 PROBLEM 5-1B (a) June 1 Merchandise Inventory (180 X \$5) Accounts Payable Accounts Receivable ( X \$10)... 1,200 Sales... 1,200 Cost of Goods Sold ( X \$5) Merchandise Inventory Accounts Payable (10 X \$5) Merchandise Inventory Accounts Payable (\$900 \$50) Merchandise Inventory (\$850 X.02) Cash Cash... 1,200 Accounts Receivable... 1, Accounts Receivable (150 X \$10)... 1,500 Sales... 1,500 Cost of Goods Sold (150 X \$5) Merchandise Inventory Merchandise Inventory ( X \$5) Accounts Payable Cash... 1,470 Sales Discounts (\$1,500 X.02) Accounts Receivable... 1, Accounts Payable Merchandise Inventory (\$600 X.02) Cash

50 PROBLEM 5-1B (Continued) June 28 Accounts Receivable (110 X \$10)... 1,100 Sales... 1,100 Cost of Goods Sold (110 X \$5) Merchandise Inventory Sales Returns and Allowances (15 X \$10) Accounts Receivable Merchandise Inventory (15 X \$5) Cost of Goods Sold

51 PROBLEM 5-2B (a) General Journal Date Account Titles and Explanation Ref. Debit Credit May 1 Merchandise Inventory... 8,000 Accounts Payable ,000 2 Accounts Receivable... Sales ,000 4,000 Cost of Goods Sold... Merchandise Inventory ,100 3,100 5 Accounts Payable... Merchandise Inventory Cash (\$4,000 \$40)... Sales Discounts (\$4,000 X 1%)... Accounts Receivable , , Accounts Payable (\$8,000 \$600)... Merchandise Inventory... (\$7,400 X 2%) Cash , , Supplies... Cash Merchandise Inventory... Cash ,700 2, Cash... Merchandise Inventory Merchandise Inventory... Accounts Payable ,500 2, Merchandise Inventory... Cash

52 PROBLEM 5-2B (Continued) General Journal Date Account Titles and Explanation Ref. Debit Credit May 24 Cash... Sales ,200 6,200 Cost of Goods Sold... Merchandise Inventory ,600 4, Merchandise Inventory... Accounts Payable ,000 1, Accounts Payable... Merchandise Inventory... (\$2,500 X 2%) Cash , , Sales Returns and Allowances... Cash Merchandise Inventory... Cost of Goods Sold Accounts Receivable... Sales ,600 1,600 Cost of Goods Sold... Merchandise Inventory , 1, 5-52

53 PROBLEM 5-2B (Continued) (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance May 1 Balance 10, ,960 13, , ,700 6,708 5,808 3, , , ,200 9, , ,838 6,738 Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance May 2 4,000 4, , ,600 1,600 Merchandise Inventory No. Date Explanation Ref. Debit Credit Balance May 1 8,000 8, , ,900 4,300 4, ,700 6, , , ,122 9, ,600 4, ,000 5, , , , 4,

54 PROBLEM 5-2B (Continued) Supplies No. 126 Date Explanation Ref. Debit Credit Balance May Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance May 1 8,000 8, ,400 7, ,500 1,000 2,500 3, ,500 1,000 J. Newson, Capital No. 301 Date Explanation Ref. Debit Credit Balance May 1 Balance 10,000 Sales No. 401 Date Explanation Ref. Debit Credit Balance May ,000 6,200 1,600 4,000 10,200 11,800 Sales Returns and Allowances No. 412 Date Explanation Ref. Debit Credit Balance May Sales Discounts No. 414 Date Explanation Ref. Debit Credit Balance May

55 PROBLEM 5-2B (Continued) Cost of Goods Sold No. 505 Date Explanation Ref. Debit Credit Balance May ,100 4,600 3,100 7, , , 8,800 (c) NEWSON HARDWARE STORE Income Statement (Partial) For the Month Ended May 31, 2008 Sales revenues Sales... \$11,800 Less: Sales returns and allowances... \$100 Sales discounts Net sales... 11,660 Cost of goods sold... 8,800 Gross profit... \$ 2,

56 PROBLEM 5-3B (a) HUFFMAN DEPARTMENT STORE Income Statement For the Year Ended November 30, 2008 Sales revenues Sales... \$850,000 Less: Sales returns & allowances... 10,000 Net sales ,000 Cost of goods sold ,220 Gross profit ,780 Operating expenses Selling expenses Salaries expense... \$90,000 (\$,000 X 75%) Sales commissions expense... 14,000 Depreciation expense store equipment... 9,500 Delivery expense... 8,200 Insurance expense... 4,500 (\$9,000 X 50%) Depreciation expense delivery equipment... 4,000 Total selling expenses... \$130,200 Administrative expenses Salaries expense... 30,000 (\$,000 X 25%) Rent expense... 19,000 Utilities expense... 10,600 Insurance expense... 4,500 (\$9,000 X 50%) Property tax expense... 3,500 Total admin. expenses... 67,600 Total oper. expenses ,800 Income from operations... 8,980 Other revenues and gains Interest revenue... 5,000 Other expenses and losses Interest expense... 8,000 3,000 Net income... \$ 5,

57 PROBLEM 5-3B (Continued) HUFFMAN DEPARTMENT STORE Owner s Equity Statement For the Year Ended November 30, 2008 M. Huffman, Capital, December 1, \$84,200 Add: Net income... 5,980 90,180 Less: Drawings... 12,000 M. Huffman, Capital, November 30, \$78,180 HUFFMAN DEPARTMENT STORE Balance Sheet November 30, 2008 Assets Current assets Cash... \$ 8,000 Accounts receivable... 11,770 Merchandise inventory... 36,200 Prepaid insurance... 4,500 Total current assets... \$ 60,470 Property, plant, and equipment Store equipment... \$125,000 Less: Accumulated depreciation store equipment... 41,800 83,200 Delivery equipment... 57,000 Less: Accumulated depreciation delivery equipment... 19,680 37,320,520 Total assets... \$180,

58 PROBLEM 5-3B (Continued) HUFFMAN DEPARTMENT STORE Balance Sheet (Continued) November 30, 2008 Liabilities and Owner s Equity Current liabilities Accounts payable... \$47,310 Sales commissions payable... 6,000 Property taxes payable... 3,500 Total current liabilities... \$ 56,810 Long-term liabilities Notes payable due ,000 Total liabilities ,810 Owner s equity M. Huffman, Capital... 78,180 Total liabilities and owner s equity... \$180,990 (b) Nov. 30 Depr. Expense Delivery Equip.... 4,000 Accumulated Depreciation Delivery Equipment... 4,000 Depr. Expense Store Equip.... 9,500 Accumulated Depreciation Store Equipment... 9,500 Insurance Expense... 9,000 Prepaid Insurance... 9,000 Property Tax Expense... 3,500 Property Taxes Payable... 3,500 Sales Commissions Expense... 6,000 Sales Commissions Payable... 6,

59 PROBLEM 5-3B (Continued) (c) Nov. 30 Sales ,000 Interest Revenue... 5,000 Income Summary , Income Summary ,020 Sales Returns and Allowances... 10,000 Cost of Goods Sold ,220 Salaries Expense...,000 Depreciation Expense Delivery Equipment... 4,000 Delivery Expense... 8,200 Sales Commissions Expense... 14,000 Depreciation Expense Store Equipment... 9,500 Insurance Expense... 9,000 Rent Expense... 19,000 Property Tax Expense... 3,500 Utilities Expense... 10,600 Interest Expense... 8, Income Summary... 5,980 M. Huffman, Capital... 5, M. Huffman, Capital... 12,000 M. Huffman, Drawing... 12,

60 PROBLEM 5-4B (a) General Journal Date Account Titles and Explanation Ref. Debit Credit Apr. 5 Merchandise Inventory... 1,500 Accounts Payable ,500 7 Merchandise Inventory... Cash Accounts Payable... Merchandise Inventory Accounts Receivable... Sales ,100 1,100 Cost of Goods Sold... Merchandise Inventory Merchandise Inventory... Accounts Payable Accounts Payable (\$1,500 \$100)... Merchandise Inventory... (\$1,400 X 2%) Cash , , Accounts Payable... Merchandise Inventory Accounts Receivable... Sales Cost of Goods Sold... Merchandise Inventory Accounts Payable (\$860 \$60)... Merchandise Inventory... (\$800 X 1%) Cash

### CHAPTER 5. Accounting for Merchandising Operations 1, 12, 13, 14 15, 16, 17, 18

CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Identify the differences between

### CHAPTER 4. Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief. A Problems. B Problems 1, 2, 3 1, 2, 3, 5, 6, 17 1B, 2B, 3B, 4B, 5B

CHAPTER 4 Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems *1. Prepare a worksheet. 1, 2, 3, 4, 5 1, 2, 3 1, 2,

### Chapter 5 Accounting for Merchandising Operations

Chapter 5 Accounting for Merchandising Operations Purchase Transactions Purchaser records goods at cost. When goods are returned, purchaser reduces Inventory. On September 5, De La Hoya Company buys merchandise

### 13 Financial Statements and Closing Procedures

13-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Financial Statements and Closing Procedures Section 1: Preparing the Financial Statements Section Objectives 1. Prepare

### CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENCES BETWEEN SERVICE AND MERCHANDISING COMPANIES. 2. EXPLAIN THE RECORDING OF PURCHASES UNDER A PERPETUAL INVENTORY

### Income Statements. Accounting for Merchandising Operations

Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Income Statements Accounting for Merchandising Operations Prepared by Naomi Karolinski Monroe Community College and Marianne Bradford Bryant College

### CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements

sg st a CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT True-False Statements 1. 1

### Chapter 5. Accounting for merchandising operations. Appendix 5A: Periodic inventory system

1 Chapter 5 Accounting for merchandising operations Appendix 5A: Periodic inventory system 2 Learning objectives 1. Record purchase and sales transactions under the periodic inventory system 2. Prepare

### CHAPTER 3. Understanding the Accounting Information System. 3. Trial balance. 6, 10 3, 4, 5 1, 2, Closing , 15, 16 1, 4, 8, 9, 11

CHAPTER 3 Understanding the Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5, 6, 7,

### Chapter 04 - Accounting for Merchandising Operations. Chapter Outline

I. Merchandising Activities Products that a company acquires to resell to customers are referred to as merchandise (also called goods). A merchandiser earns net income by buying and selling merchandise.

### Chapter 5 Merchandising Operations

Chapter 5 Merchandising Operations Financial Statements of a Service Company and a Merchandiser: - Service Companies: Revenues earned through performance of services. Examples: Dentists, Accounting Firms,

### Closing Entries and the Postclosing Trial Balance

6-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 1: Closing Entries Section Objectives 1. Journalize and post

### CHAPTER5 Accounting for Merchandising Operations 5-1

CHAPTER5 Accounting for Merchandising Operations 5-1 5-2 PreviewofCHAPTER5 Merchandising Operations Merchandising Companies Buy and Sell Goods Wholesaler Retailer Consumer The primary source of revenues

### CHAPTER 6. Accounting for retailing CONTENTS

CHAPTER 6 Accounting for retailing CONTENTS 6.1 Journal entries periodic inventory system 6.2 Journal entries involving discounts, closing entries and statements of financial performance both perpetual

### SOLUTIONS TO EXERCISES SET B

SOLUTIONS TO EXERCISES SET B EXERCISE 4-1B GREEN COMPANY Worksheet For the Month Ended June 30, 2008 Account Titles Trial Balance Adjustments Adj. Trial Balance Income Statement Balance Sheet Dr. Cr. Dr.

### CHAPTER 3. The Accounting Information System. 3. Trial balance. 6, 10 2, 3, 4 1, 2, Adjusting entries. 8, 11, 13, 14 3, 4, 5, 6, 7, 8, 9, 10

CHAPTER 3 The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5, 6, 7, 8 1, 2 1, 2,

### Chapter 13 Financial Statements and Closing Procedures

Chapter 13 - Financial Statements and Closing Procedures Chapter 13 Financial Statements and Closing Procedures TEACHING OBJECTIVES 13-1) Prepare a classified income statement from the worksheet. 13-2)

### CHAPTER 4. Completion of the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief Exercises 1, 2, 3 1, 2, 3, *11 7, 8 4, *17, *18 *10, *11, *12

CHAPTER 4 Completion of the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Prepare closing entries and a postclosing

### Test 2 Review - Fall 2008 Friday class ONLY Chapters 5,6,7 & 8

Test 2 Review - Fall 2008 Friday class ONLY Chapters 5,6,7 & 8 Name The following review includes 80 multiple choice questions of which I will choose 33 on the test. MULTIPLE CHOICE. Choose the one alternative

### Chapter 5. Merchandising Operations

Merchandising Operations Chapter 5 When a service business earns fees they record revenue from the services rendered. In the case of the merchandising business you still have the revenue transaction, but

### CHAPTER 3. The Accounting Information System. 1. Transaction identification. 1, 2, 3, 5 1, 2 1, 2, 3, 4, Trial balance. 6, 10 2, 3, 4 1, 2, 7

CHAPTER 3 The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5 1, 2 1, 2, 3, 4, 17

### EXERCISES: SET B. Exercises: Set B 35

EXERCISES: SET B E5-1B Mrs. Wellington has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually different from

### Accounting for a Merchandising Business

Chapter 11 Accounting for a Merchandising Business ANSWERS TO SECTION 11.1 REVIEW QUESTIONS (text p. 428) The Merchandising Business 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 1. 2. 3. 4. 14. 15. Copyright

### CHAPTER 9. Inventories ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems. 1. Describe the steps in determining inventory quantities.

CHAPTER 9 Inventories ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Describe the steps in determining inventory quantities. 4, 5, 6, 7, 8,

### ANSWERS TO QUESTIONS FOR GROUP LEARNING

Accounting for a 5 Merchandising Business ANSWERS TO QUESTIONS FOR GROUP LEARNING Q5-1 A merchandising business has a major revenue reduction called cost of goods sold. The computation of cost of goods

### Accounting for Merchandising Operations

Instructor: masum 5-1 Bangladesh University of Textiles 5 Accounting for Merchandising Operations Learning Objectives After studying this chapter, you should be able to: [1] Identify the differences between

### b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played.

CHAPTER FOUR SE4-2 Revenue recognition a. Recognize revenue from car sales for 12,000. Notes receivable \$12,000 Sales revenue \$12,000 b. Do not recognize revenue until steel is shipped. c. Do not recognize

### CHAPTER5. Accounting for. Merchandising Operations. PreviewofCHAPTER5. Merchandising Companies. Buy and Sell Goods. Wholesaler Retailer Consumer

CHAPTER5 Accounting for Merchandising Operations 5-1 5-2 PreviewofCHAPTER5 Merchandising Operations Merchandising Companies Buy and Sell Goods Wholesaler Retailer Consumer The primary source of revenues

### ANSWERS TO SAMPLE TEST #4

ANSWERS TO SAMPLE TEST #4 PART A: 1 F 21 C 41 B 2 T 22 D 42 A 3 T 23 D 43 A 4 F 24 A 44 C 5 T 25 B 45 B 6 F 26 A 46 D 7 F 27 C 47 C 8 T 28 B 48 A 9 T 29 B 49 C 10 F 30 C 50 A 11 T 31 A 12 F 32 D 13 F 33

### SOLUTIONS. Learning Goal 16

Learning Goal 16: Prepare Closing Entries S1 Learning Goal 16 Multiple Choice 1. d 2. a 3. b 4. d Because drawing is closed directly into the capital account, not into income summary. 5. c 6. b This a

### Merchandising Operations

5 Merchandising Operations WHAT YOU PROBABLY ALREADY KNOW You want to order a pair of pants from a mail-order catalog. The price listed in the catalog is \$50. There is a 10% off coupon in the catalog for

### Chapter 5. Learning Objectives. Income Statements. Retailing Operations. Horngren, Best, Fraser, Willett: Accounting 6e 2010 Pearson Australia

PowerPoint to accompany Chapter 5 Retailing Operations Learning Objectives 1. Account for the purchase of inventory and GST 2. Account for the sale of inventory and GST 3. Adjust and close the accounts

### The Statement of Cash Flows Direct Method

23 The Statement of Cash Flows Direct Method DEMONSTRATION PROBLEM The financial statements of Bolero Corporation follow. Copyright Houghton Mifflin Company. All rights reserved. 1 Bolero Corporation Income

### Financial Statements and Year-End Accounting for a Merchandising Business woot was originally a truncated expression commonly used by players

Chapter 15 COURTESY OF WOOT.COM LEARNING OBJECTIVES Careful study of this chapter should enable you to: LO1 Prepare a single-step and multiple-step income statement for a merchandising business. LO2 Prepare

### CHAPTER 5 Merchandising Operations. Study Objectives

CHAPTER 5 Merchandising Operations Study Objectives Identify the differences between a service enterprise and a merchandising company. Explain the recording of purchases under a perpetual inventory system.

### The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts

Recap from Week 3 The Measurement of the Business Income The primary objective of accounting is measuring the net income of the businesses according to the generally accepted accounting principles. Net

### CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET Chapter Opener: Thinking Critically Students may assess that an unexpected decline in sales would mean surplus inventory which would have to be reduced

### 2. A service company earns net income by buying and selling merchandise. Ans: False

Chapter 6: Accounting For Merchandising Activities True/False 1. Merchandise consists of products that a company acquires for the purpose of reselling them to customers. 2. A service company earns net

### Accounting Basics, Part 3

Accounting Basics, Part 3 The Income Statement, Balance Sheet and Basic Financial Analysis Part 3 What s Here Introduction Financial Statements Income Statement Balance Sheet Sample Statements Impacting

### 5-1. Prepared by Coby Harmon University of California, Santa Barbara Westmont College

5-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College 5 Accounting for Merchandising Operations Learning Objectives After studying this chapter, you should be able to: [1]

### Accounting for Merchandising Operations

Prepared by Coby Harmon University of California, Santa Barbara Westmont College 5-1 5 Accounting for Merchandising Operations Learning Objectives After studying this chapter, you should be able to: [1]

### CHAPTER 6. Inventories ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief. 1. Describe the steps in determining inventory quantities.

CHAPTER 6 Inventories ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Describe the steps in determining inventory quantities. 1, 2, 3, 4, 5

### EXERCISES. 248 Chapter 5

248 Chapter 5 EXERCISES When the instructions for any exercise or problem call for the preparation of an income statement, use the multistep format unless otherwise indicated. EXERCISE 5 1 Comparing a

### Equity The remainder is the shareholders claim on the assets-equity. It is often referred to as residual equity.

ACT 1600 Fundamental of Financial Accounting Chapter 1 The Basic Accounting Equation Asset = Liabilities + Equity Asset Assets are resources a business owns. The common characteristic possessed by all

### CHAPTER 6. Inventories ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief Exercises Do It! Exercises

CHAPTER 6 Inventories ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe the steps in determining inventory quantities. 1, 2,

### SOLUTIONS TO BRIEF EXERCISES

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 4-1 1. Prepare a trial balance on the work sheet 2. Enter adjustment data 3. Enter adjusted balances 4. Enter adjusted balances in appropriate statement columns

### CHAPTER 5 ACCOUNTING FOR MERCHANDISING BUSINESSES

1. Merchandising businesses acquire merchandise for resale to customers. It is the selling of merchandise, instead of a service, that makes the activities of a merchandising business different from the

### PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

### Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. (\$20,000 2,000) 48 = \$375 per month 2. Jan. 31 Depreciation Expense \$375 Accumulated Depreciation Van \$375 To record depreciation expense for January

### DRAFT. Accounting for a Merchandising Business. SECTION 10.1 REVIEW QUESTIONS (page 401) 1. 5. 6. 7. 8. 10. 11. 12. 13. 14. 15. 16. 17.

CHAPTER 10 Accounting for a Merchandising Business SECTION 10.1 REVIEW QUESTIONS (page 401) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 324 Accounting 1 Student Workbook Copyright 2013 Pearson

### CHAPTER 14. Corporations: Dividends, Retained Earnings, and Income Reporting ASSIGNMENT CLASSIFICATION TABLE. Brief. A Problems.

CHAPTER 14 Corporations: Dividends, Retained Earnings, and Income Reporting ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Prepare the entries

### Name: Date: 2. Sales revenue less cost of goods sold is called A) gross profit. B) net profit. C) net income. D) marginal income.

Name: Date: 1. Two categories of expenses for merchandising companies are A) cost of goods sold and financing expenses. B) operating expenses and financing expenses. C) cost of goods sold and operating

### Chapter 2. Use accounting terms. Learning Objectives. Objective 1. Recording business transactions

PowerPoint to accompany Chapter 2 Recording business transactions Learning Objectives 1. Use accounting terms 2. Apply the rules of debit and credit 3. Record transactions in the journal 4. Post from the

### CHAPTER 6 ACCOUNTING FOR MERCHANDISING BUSINESSES

1. CHAPTER 6 ACCOUNTING FOR MERCHANDISING BUSINESSES Merchandising businesses acquire merchandise for resale to customers. It is the selling of merchandise, instead of a service, that makes the activities

### Completing the Accounting Cycle

HOSP 1210 (Financial Acct) Learning Centre Completing the Accounting Cycle At the end of the accounting cycle, the final steps are to journalize and post closing entries and to prepare a post-closing trial

### CHAPTER 6. Inventories , 12

CHAPTER 6 Inventories ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Determine how to classify inventory and inventory quantities.

### Self-test Comprehensive Problems II 综 合 自 测 题 II

Self-test Comprehensive Problems II 综 合 自 测 题 II Part One (30%) 1. Give the Chinese/English of the following terms: (5%) subsidiary ledger 统 制 账 户 purchase requisition 现 金 溢 缺 petty cash fund 永 续 盘 存 制

### Assets=Liabilities + Owner s Equity. Owner s Equity= Owner s Capital (Investments) Drawings + Profit OR Loss

Chapter 1~3 Important formulas Assets=Liabilities + Owner s Equity An expansion: Owner s Equity= Owner s Capital (Investments) Drawings + Profit OR Loss [Note: Owner s capital includes investments by the

### PART A: TRUE/FALSE (1 point each):

CHABOT COLLEGE General Accounting (BUS-7) Dmitriy Kalyagin PART A: TRUE/FALSE (1 point each): EXAM #4 (Chapters 10, 12, 13) 1. Employees who are exempt from the FLSA are entitled for overtime pay for hours

### Accounting Cycle. Matching Principle

CHAPTER 3 Accounting Cycle Analyze and record the transactions Post the transactions and prepare trial balance Adjust the accounts and prepare trial balance Prepare the financial statements Close the accounts

### Ch6. Student: 2. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement.

Ch6 Student: 1. Inventory is usually reported as a long-term asset in the balance sheet. 2. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income

### CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

### For more course tutorials visit www.uoptutorial.com

ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/ product&path=737&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

### Jackson Company recorded the following cash transactions for the year:

ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/product&path=7 37&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

### TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations:

TRANSACTIONS ANALYSIS EXAMPLE Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: 1. Billings to clients for services provided: \$350,000

### CHAPTER 8. Accounting for Receivables 1, 2 1 3, 4, 5, 6, 7 4, 5, 6, 7, 8 12, 13, 14, 15, 16

CHAPTER 8 Accounting for Receivables ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Identify the different types of receivables.

### 2 Under a perpetual inventory system merchandise is purchased for cash. Which is the correct journal entry to record this purchase?

KRUG PRACTICE TEST ACCTG 1 - CHAP 5,6 PRACTICE TEST -- The following is a practice test for Accounting 1, Chapters 5 and 6 It is only a representation of wha the test could be like. It is not a guarantee

### Accounting for a Merchandising Business

CHAPTER 10 Accounting for a Merchandising Business SECTION 10.1 REVIEW QUESTIONS (page 401) 1. A service business sells a service to the general public but does not deal in merchandise. For example, a

### 43.Net income is gross profit less a. financing expenses. b. operating expenses. c. other expenses and losses. d. other expenses.

Chapter 5 Review Please complete the following to be corrected on Tuesday. Additionally, please review your prior tests and bring any questions, etc you may have to class Tuesday for review of Chapters

### CHAPTER 14. Corporations: Dividends, Retained Earnings, and Income Reporting 1, 2, 3, 4, 5, 6, 7, 8, 18 9, 10, 11, 12, 13, 14

CHAPTER 14 Corporations: Dividends, Retained Earnings, and Income Reporting ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Prepare

### RAPID REVIEW Chapter Content

RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

### 2-8. Identify whether each of the following items increases or decreases cash flow:

Problems 2-8. Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable Increase in notes payable Depreciation expense Increase in investments Decrease

### Accumulated Depreciation Equipment

Chapter 4 Completing the Accounting Cycle > DO IT! Worksheet Balance sheet: Extend assets to debit column. Extend liabilities to credit column. Extend contra assets to credit column. Extend drawings account

### Module 4 - Audio File Legend

Module 4 - Audio File Legend Part 1 2 3 4 5 Content Learning Objectives and Basics of merchandising operations Recording merchandise purchases and sales Problem: Purchase and sale journal entries Income

### ASSIGNMENT CHARACTERISTICS TABLE

CHAPTER 9 Long-Lived Assets ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Apply the cost principle to property, plant, and equipment.

### Work4Me I Accounting Simulations. Problem Eight

Work4Me I Accounting Simulations 3 rd Web-Based Edition Problem Eight Accounting for Accounts Payable and Merchandise Inventory using a Perpetual Inventory System Page 1 UPTIGHT TOOLS, INCORPORATED CHART

### Fundamentals of Financial Accounting

Fundamentals of Financial Accounting CHAPTER I Accounting in action. What is accounting? Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting

### 1. \$45000 2. \$108000 3. \$63000 4. \$135000

For the last several years Monte Cristo Corp. has operated with a gross profit rate of 30%. On January 1 of the current year, the company had on hand inventory with a cost of \$150,000. Purchases of merchandise

### Bookkeeping Quiz = + For each account listed below, indicate whether it normally has a debit or a credit balance: III.

ookkeeping Quiz I. Match the account titles with the appropriate financial statement classification: A Current Assets Sales Property, Plant and Equipment Cash in Checking C Other Assets Accumulated Depreciation

### Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS

Financial Accounting Study Guide Fall 2013 CH1 & 2 PART VI RATIOS Name: Selected information from the financial statements of Miller Company for the year ended December 31, 2012, appears below: 2012 Current

### ACCT1115. Review Package - Midterm SOLUTION Fall 2013

ACCT1115 Review Package - Midterm SOLUTION Fall 2013 Part I Multiple Choice 1) How should you record the purchase of an expensive automobile? a) Decrease cash, increase assets b) Decrease cash, increase

### Chapter 6 Inventory and Cost of Goods Sold

REVIEW QUESTIONS Chapter 6 Inventory and Cost of Goods Sold Question 6-1 (LO 6-1) Inventory includes items a company intends for sale to customers. Inventory also includes items that are not yet finished

### CHAPTER 9. Plant Assets, Natural Resources, and Intangible Assets 3, 4, 5, 6, 7, 8, 9 4, 5, 6, 7, 8, 9, 10, 24, 25, 26 16, 17, 18, 19, 20, 21, 22

CHAPTER 9 Plant Assets, Natural Resources, and Intangible Assets ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe how the

### CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

### MIDTERM EXAMINATION. Afaaq_tariq@yahoo.com. Fall 2009

MIDTERM EXAMINATION Afaaq_tariq@yahoo.com Fall 2009 FIN621- Financial Statement Analysis Asslam O Alikum FIN621- Financial Statement Analysis (Session 3) solved by Afaaq n Shani Bhai with reference n numerical

### CHAPTER 9. Accounting for Receivables ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 1, 2 1

CHAPTER 9 Accounting for Receivables ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Identify the different types of receivables. 2. Explain

### CHAPTER 6 ACQUISITIONS AND PAYMENT: INVENTORY AND LIABILITIES

CHAPTER 6 ACQUISITIONS AND PAYMENT: INVENTORY AND LIABILITIES Acquiring Merchandise for Sale Purchases (pp. 214-16) Purchase Discounts When a company takes advantage of a purchase discount, it reduces

### Chapter 6 Homework BRIEF EXERCISE 6-6

Chapter 6 Homework BRIEF EXERCISE 6-6 Dec. 31 Sales... 630,000 Merchandise Inventory (December 31)... 90,000 Purchase Returns and Allowances... 11,000 Capital... 731,000 Dec. 31 Capital... 476,000 Merchandise

### Accounting II Second Semester Final

Name: Class: Date: Accounting II Second Semester Final Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is the difference between:

### CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation After studying Chapter 1, you will be able to: 1. Define accounting

### Assessment Schedule 2013 Accounting: Prepare financial information for an entity that operates accounting subsystems (91176)

NCEA Level 2 Accounting (91176) 2013 Page 1 of 7 Assessment Schedule 2013 Accounting: Prepare financial information for an entity that operates accounting subsystems (91176) Evidence Part A Question One

### COMPONENTS OF THE STATEMENT OF CASH FLOWS

ILLUSTRATION 24-1 OPERATING, INVESTING, AND FINANCING ACTIVITIES COMPONENTS OF THE STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES + Sales and Service Revenue Received Cost of Sales Paid Selling

### Most of us have had to file a personal tax return. At

C H A P T E R Completing the Accounting Cycle AP Photo/Gregory Bull E L E C T R O N I C A R T S I N C. Most of us have had to file a personal tax return. At the beginning of the year, you estimate your

### DETAILS Chapter 11a: How to Prepare the Worksheet The Big Picture

2008 by Mark Krilanovich Mark Krilanovich November 22, 2008 ACCT 110 DETAILS Chapter 11a: How to Prepare the Worksheet The Big Picture 1. Chapters 9 and 10 introduced ten new accounts (see p. Ch. 9b and

Chapter 9 Work Sheet and Adjustments for a Merchandising Business Adjustments for the Merchandise Inventory account Complete a work sheet for a merchandising business Merchandise Inventory adjustment and