CHAPTER 5 Accounting for Merchandising Operations
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- Loreen Robbins
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1 CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Describe the differences between a service company and a merchandising company. 1, 2, 3, 4, Explain and complete the entries for purchases under a perpetual inventory system. 6, 7 2, 4, 5 1, 3, 4, 5, 6 1, 2, 3, *9. *10 1, 2, 3, *9, *10 3. Explain and complete the entries for sales revenue under a perpetual inventory system. 7, 8, 9 3, 4, 5 2, 3, 4, 5 1, 2, 3, *9, *10 1, 2, 3, *9, *10 4. Explain and perform the steps in the accounting cycle for a merchandising company. 10, 11, 12 6, 7 6, 7 4, 5, *11 4, 5, *11 5. Distinguish between and be able to prepare both a multiple-step and a single-step income statement. 13, 14, 15, 16 8, 9, 10 7, 8, 9, 10 3, 4, 5, 6, 7, *10, *11 3, 4, 5, 6, 7, *10, *11 6. Explain the importance of and be able to calculate gross profit. 7. Calculate the inventory turnover and days sales in inventory ratios. *8. Describe and perform the accounting for sales taxes (Appendix 5A). *9. Prepare a work sheet for a merchandising company (Appendix 5B) , 11 10, , 19, , *21, *22 *12 *12 *9, *10 *9, *10 *23 *13 *13 *11 *11 *Note: All asterisked Questions, Exercises, and Problems relate to material contained in the Appendices to each chapter. 5-1
2 ASSIGNMENT CHARACTERISTIC TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Journalize and post inventory transactions. Moderate A Journalize inventory transactions. Moderate A Journalize, post, and prepare partial income statement and balance sheet. Moderate A Prepare financial statements and closing entries. Moderate A Prepare financial statements, adjusting and closing entries. Moderate A Classify the accounts of a merchandising company. Simple A Prepare correct multiple-step and single-step income statements. Complex A Calculate inventory ratios and comment. Moderate *9A Journalize inventory transactions with sales tax. Moderate *10A Journalize, post, and prepare trial balance and partial income statement, with sales taxes. *11A Complete work sheet, financial statements, adjusting and closing entries, and post-closing trial balance. Moderate Moderate B Journalize and post inventory transactions. Moderate B Journalize inventory transactions. Moderate B 4B Journalize, post, and prepare partial income statement and balance sheet. Prepare financial statements, adjusting entries, and closing entries. Moderate Moderate B Prepare financial statements, adjusting entries and closing entries. Moderate B Classify the accounts of a merchandising company. Simple B Prepare correct multiple-step and single-step income statements. Complex B Calculate inventory ratios and comment. Moderate *9B Journalize inventory transactions, with sales tax. Moderate *10B Journalize, post, and prepare trial balance and partial income statement, with sales taxes. *11B Complete work sheet, financial statements, adjusting and closing entries, and post-closing trial balance. Moderate Moderate
3 BLOOM S TAXONOMY TABLE Correlation Chart between Bloom s Taxonomy, Study Objectives and End-of-Chapter Material Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1. Describe the differences between a service company and a merchandising company. Q5-1 Q5-2 Q5-3 Q5-4 Q5-5 BE Explain and complete the entries for purchases under a perpetual inventory system. 3. Explain and complete the entries for sales revenue under a perpetual inventory system. 4. Explain and perform the steps in the accounting cycle for a merchandising company. Q5-6 Q5-7 Q5-8 Q5-7 Q5-9 Q5-12 Q5-10 Q5-11 BE5-2 BE5-4 BE5-5 E5-1 E5-3 E5-4 E5-6 P5-1A P5-2A BE5-3 BE5-4 BE5-5 E5-2 E5-3 E5-4 P5-1A P5-2A BE5-6 BE5-7 E5-6 E5-7 P5-4A P5-3A *P5-9A *P5-10A P5-1B P5-2B P5-3B *P5-9B *P5-10B P5-3A *P5-9A *P5-10A P5-1B P5-2B P5-3B *P5-9B *P5-10B P5-5A *P5-11A P5-4B P5-5B *P5-11B E5-5 E Distinguish between and be able to prepare both a multiple-step and a single-step income statement. 6. Explain the importance of and be able to calculate gross profit. Q5-14 P5-6A P5-6B Q5-15 Q5-16 Q5-13 BE5-8 BE5-9 BE5-10 E5-7 E5-9 E-10 P5-3A P5-4A P5-5A Q5-17 BE5-10 P5-7A *P5-10A *P5-11A P5-3B P5-4B P5-5B P5-7B *P5-10B *P5-11B BE5-11 E5-10 E5-8 E5-11 P5-8A P5-8B 7. Calculate the inventory turnover and days sales in inventory ratios. Q5-18 Q5-19 Q5-20 BE5-11 E5-10 E5-11 P5-8A P5-8B *8. Describe and perform the accounting for sales taxes (Appendix 5A). *9. Prepare a work sheet for a merchandising company (Appendix 5B). *Q5-23 *BE5-13 *E5-13 *Q5-21 *Q5-22 *BE5-12 *E5-12 *P5-11A *P5-10B *P5-11B *P5-9A *P5-10A *P5-9B *P5-10B Broadening Your Perspective BYP5-1 BYP 5-2 BYP5-3 BYP5-4 BYP5-5 BYP5-6 BYP
4 ANSWERS TO QUESTIONS 1. The components of revenues and expenses differ as follows: Merchandising Service Revenue Sales Service Revenue, Fees Earned, Rent Revenue, Interest Revenue, Investment Income, Gains Other Revenue Expenses Other Expense Rent Revenue, Interest Revenue, Investment Income, Gains Cost of Goods Sold, Operating Expenses Interest Expense, Losses All expenses 2. The income measurement process in a merchandising company can be summarized as follows: Sales Revenues Less Cost of Goods Sold Equals Gross Profit Less Operating Expenses Equals Net Income 3. The normal operating cycle for a merchandising company is likely to be longer than for a service company because inventory must first be purchased and sold, and then the receivables must be collected. 4. Under a perpetual inventory system, inventory quantities and amounts are updated continually. At any point in time, the Cost of Goods Sold and Inventory accounts represent what has been sold to date, and what remains. Under a periodic inventory system, temporary accounts are used to accumulate purchases of inventory throughout the period. The cost of goods sold and inventory are determined only at the end of the period (annually for example). 5-4
5 Questions Chapter 5 (Continued) 5. Computer technology enables perpetual inventory systems to be used by any company that requires timely information about the quantities of inventory on hand. It is more complex and costly to maintain a perpetual inventory record of costs, so companies with point of sale systems integrated with their inventory systems tend to be larger. 6. The reason for recording the purchase of merchandise for resale in a separate account is to enable a company to determine its gross profit. This information is useful in setting prices. 7. The letters FOB mean free on board. FOB shipping point means that the goods are placed free on board the carrier by the seller, and the buyer pays the freight costs. FOB shipping point will result in a debit to the Inventory account by the buyer. FOB destination means that the goods are placed free on board to the buyer s place of business, and the seller pays the freight. FOB destination will result in a debit to the Freight Out account by the seller. 8. (a) The primary source documents are: (1) Cash sales cash register tapes, (2) Credit sales sales invoices, and (3) Sales returns and allowances credit memoranda. 5-5
6 Questions Chapter 5 (Continued) 8. (b) Seller Debit Credit Cash sales Cash... XXX Sales... XXX Cost of Goods Sold... Merchandise Inventory... XXX XXX Credit sales Accounts Receivable... XXX Sales... XXX Cost of Goods Sold... Merchandise Inventory... XXX XXX Sales returns Sales Returns and Allowances... XXX & allowances Accounts Receivable or Cash XXX Merchandise Inventory... Cost of Goods Sold... XXX XXX Purchaser Cash purchase Merchandise Inventory... XXX Cash... XXX Credit purchase Merchandise Inventory... Accounts Payable... XXX XXX Purchase returns Cash or Accounts Payable... XXX & allowances Merchandise Inventory... XXX 9. Sales returns are not debited directly to the Sales account because this would not provide information on the cost of the goods returned. This information can be useful in making decisions. Debiting returns directly to sales may also cause problems in comparing sales for different periods. 5-6
7 Questions Chapter 5 (Continued) 10. Disagree. The steps in the accounting cycle are the same for both a merchandising company and a service enterprise. 11. A physical count is an important control feature. Using a perpetual inventory system a company knows what should be on hand. Performing a physical counts and checking it to the perpetual records is necessary to detect any errors in record keeping and/or shortages in stock. 12. Of the merchandising accounts, only Merchandise Inventory (ending) will appear in the post-closing trial balance. 13. Gross profit... $580,000 Less: Net income ,000 Operating expenses... $280, (a) The operating activities part of the income statement has three sections: sales revenues, cost of goods sold, and operating expenses. (b) The non-operating activities part consists of two sections: other revenues and gains, and other expenses and losses. 15. The functional groupings are selling and administrative. The problem with functional groupings is that some expenses may relate to both, and have to be allocated between the functions. 16. 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). 5-7
8 Questions Chapter 5 (Continued) 17. Sales revenues... $100,000 Cost of goods sold... 70,000 Gross profit... 30,000 Operating expenses... 20,000 Net income... $ 10,000 Gross profit margin = $30,000 $100,000 = 30% Profit margin = $10,000 $100,000 = 10% 18. Two ratios that help management determine whether or not there is sufficient inventory on hand are Inventory turnover and days sales in inventory 19. Managing inventory is critical to a company s success. It is often the largest current asset (inventory) and the largest expense (cost of goods sold) on the income statement. Companies must manage the quantity of inventory on hand to avoid excessive cost and to ensure they can meet demand. 20. An increase in days sales in inventory would be viewed as a deterioration because it means there is more inventory on hand in relation to sales. *21. Accounts Receivable... 1,053 Sales GST Payable PST Payable Cost of Goods Sold Merchandise Inventory *22. Office Furniture [$2,000 + (8% x $2,000)]... 2,160 GST Recoverable ($2,000 x 7%) Accounts Payable... 2,300 *23. (a) Merchandise inventory Trial balance debit column; Adjusted trial balance debit column; and Balance sheet debit column (b) Cost of goods sold Trial balance debit column; Adjusted trial balance debit column; and Income statement debit column 5-8
9 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-1 (a) Cost of goods sold = $43,500 ($75,000 $31,500) Operating expenses = $20,700 ($31,500 $10,800) (b) Gross profit = $38,000 ($108,000 $70,000) Operating expenses = $8,500 ($38,000 $29,500) (c) Sales = $181,500 ($71,900 + $109,600) Net income = $70,100 ($109,600 $39,500) BRIEF EXERCISE 5-2 Rowen Company (a) March 2 Merchandise Inventory ,000 Accounts Payable ,000 (b) March 6 Accounts Payable ,000 Merchandise Inventory ,000 (c) March 31 Accounts Payable ($900,000 $130,000) ,000 Cash ,
10 BRIEF EXERCISE 5-3 Hunt Company (a) March 2 Accounts Receivable ,000 Sales ,000 Cost of Goods Sold ,000 Merchandise Inventory ,000 (b) March 6 Sales Returns and Allowances ,000 Accounts Receivable ,000 Merchandise Inventory... 90,000 Cost of Goods Sold... 90,000 (c) March 31 Cash ($900,000 $130,000) ,000 Accounts Receivable ,000 BRIEF EXERCISE 5-4 Keo Company Nov. 12 Merchandise Inventory Cash Mayo Company Nov. 12 Cash Sales Cost of Goods Sold Merchandise Inventory
11 BRIEF EXERCISE 5-5 March 3 Merchandise Inventory (20 X $25) Accounts Payable March 6 Accounts Payable Merchandise Inventory (3 X $25) March 21 Accounts Receivable (15 X $45) Sales Cost of Goods Sold (15 x $25) Merchandise Inventory Quantity: = 2 units remaining Cost: $500 - $75 - $375 = $50 Proof: 2 units x $25 = $50 BRIEF EXERCISE 5-6 Aug. 31 Cost of Goods Sold (Inventory shrinkage) Merchandise Inventory ($98,000 $97,100) BRIEF EXERCISE 5-7 July 31 Sales ,000 Prasad, Capital ,000 Prasad, Capital ,000 Sales Returns and Allowances... 2,000 Cost of Goods Sold ,000 Ending capital balance (not required): $150,000 + $180,000 - $102,000 = $228,000 Merchandise Inventory is a balance sheet (permanent) account and is not closed. 5-11
12 BRIEF EXERCISE 5-8 HULDA COMPANY Income Statement (Partial) For the Month Ended October 31, 2003 Sales revenues Sales ($300,000 + $100,000)... $400,000 Less: Sales returns and allowances... 30,000 Net sales... $370,000 BRIEF EXERCISE 5-9 (1) Multiple-Step Income Statement Item Section a. Gain on sale of equipment Other revenues and gains b. Interest expense Other expenses and losses c. d. Cost of goods sold Rent revenue Cost of goods sold Other revenues and gains (2) Single-Step Income Statement Item a. Gain on sale of equipment Revenues b. Interest expense Expenses c. d. Cost of goods sold Rent revenue Expenses Revenues Section 5-12
13 BRIEF EXERCISE 5-10 (a) Net sales = $485,000 ($500,000 $15,000) (b) Gross profit = $145,000 ($485,000 $340,000) (c) Net income = $35,000 ($145,000 - $70,000- $40,000) BRIEF EXERCISE 5-11 (a) Gross profit margin = 45% [($550,000 $300,000) $550,000] (b) Inventory turnover = 12 times ($300,000 $25,000) (c) Days sales in inventory = 30 days (365 12) *BRIEF EXERCISE 5-12 Merchandise Inventory... 8,000 Supplies [$1,000 + ($1,000 X 10%)]... 1,100 GST Recoverable [($8,000 + $1,000) X 7%] Accounts Payable... 9,730 *BRIEF EXERCISE 5-13 (a) Cash: Trial balance debit column; Adjusted trial balance debit column; Balance sheet debit column. (b) Merchandise Inventory: Trial balance debit column; Adjusted trial balance debit column; Balance sheet debit column. (c) Sales: Trial balance credit column; Adjusted trial balance credit column; Income statement credit column. (d) Cost of Goods Sold: Trial balance debit column; Adjusted trial balance debit column; Income statement debit column. 5-13
14 SOLUTIONS TO EXERCISES EXERCISE April 5 Merchandise Inventory... 18,000 Accounts Payable... 18, April 6 Merchandise Inventory Cash April 7 Equipment... 26,000 Accounts Payable... 26, April 8 Accounts Payable... 3,000 Merchandise Inventory , May 2 Accounts Payable ($18,000 $3,000)... 15,000 Cash... 15,
15 EXERCISE 5-2 (a) Pippen Company 1. Dec. 3 Accounts Receivable ,000 Sales ,000 Cost of Goods Sold ,000 Merchandise Inventory , Dec. 8 Sales Returns and Allowances... 20,000 Accounts Receivable... 20, Dec. 13 Cash ($400,000 $20,000) ,000 Accounts Receivable ,000 (b) Thomas Co. 1. Dec. 3 Merchandise Inventory ,000 Accounts Payable , Dec. 8 Accounts Payable... 20,000 Merchandise Inventory... 20, Dec. 13 Accounts Payable ,000 Cash ,
16 EXERCISE 5-3 Sept. 6 Merchandise Inventory (60 X $20)... 1,200 Accounts Payable... 1, Accounts Payable (2 X $20) Merchandise Inventory Accounts Receivable (26 X $30) Sales Cost of Goods Sold (26 X $20) Merchandise Inventory Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold Accounts Receivable (30 X $30) Sales Cost of Goods Sold (30 X $20) Merchandise Inventory
17 EXERCISE 5-4 Sept. 2 Merchandise Inventory (90 X $15)... 1,350 Accounts Payable... 1,350 5 Accounts Payable Merchandise Inventory Accounts Receivable... 1,250 Sales (50 x $25)... 1,250 Cost of Goods Sold Merchandise Inventory (50 x $15) Accounts Receivable Sales (30 x $25) Cost of Goods Sold Merchandise Inventory (30 x $15) Merchandise Inventory (15 x $16) Accounts Payable Cost of Goods Sold (Inventory Loss)... 15* Merchandise Inventory = 31 desk sets per records; 30 desk sets per count = 1 missing * Note: We assumed that the missing desk set had a cost of $15. It could also have been assumed to be $16, from the September 20 purchase. 5-17
18 EXERCISE Sales Returns and Allowances Sales Supplies Cash Accounts Payable Merchandise Inventory Sales Merchandise Inventory Cash Merchandise Inventory
19 EXERCISE 5-6 (a) Jun. 10 Merchandise Inventory... 5,000 Accounts Payable... 5, Merchandise Inventory Cash Accounts Payable Merchandise Inventory July 7 Accounts Payable ($5,000 $500)... 4,500 Cash... 4, Cash... 8,500 Sales... 8, Cost of Goods Sold ($5,000 + $300 - $500)... 4,800 Merchandise Inventory... 4,800 (b) July 31 Sales... 8,500 Capital... 8, Capital... 4,800 Cost of Goods Sold... 4,
20 EXERCISE 5-7 (a) CECILIE COMPANY Income Statement (Partial) For the Year Ended October 31, 2003 Sales revenues Sales... $900,000 Less: Sales returns and allowances... 24,000 Net sales... $876,000 Note: Freight Out is a selling expense. (b) Closing entries: Oct. 31 Sales ,000 Capital , Capital... 36,000 Sales Returns and Allowances... 24,000 Freight Out... 12,
21 EXERCISE 5-8 Natural Cosmetics Mattar Grocery Allied Wholesalers Sales $90,000 (c) $100,000 $144,000 Less: Sales returns (a) 16,000 6,000 12,000 Net sales 74,000 94,000 (f) 132,000 Less: Cost of goods sold 64,000 (d) 72,000 (g) 108,000 Gross profit 10,000 22,000 24,000 Less: Operating expenses 6,000 (e) 12,000 18,000 Net income (b) $ 4,000 $ 10,000 (h) $ 6,000 (a) Sales... $90,000 *Sales returns... (16,000) Net sales... $74,000 (b) Gross profit... $10,000 Operating expenses... (6,000) *Net income... $ 4,000 (c) *Sales... $100,000 Sales returns... (6,000) Net sales... $ 94,000 (d) Net sales... $94,000 *Cost of goods sold... (72,000) Gross profit... $22,000 (e) Gross profit... $22,000 *Operating expenses... (12,000) Net income... $10,000 (f) Sales... $144,000 Sales returns... (12,000) *Net sales... $132,000 (g) Net sales... $132,000 *Cost of goods sold... (108,000) Gross profit... $ 24,000 (h) Gross profit... $24,000 Operating expenses... (18,000) *Net income... $ 6,
22 EXERCISE 5-9 (a) CHEVALIER COMPANY Income Statement For the Year Ended December 31, 2002 Net sales... $2,359,000 Cost of goods sold... 00,989,000 Gross profit... 1,370,000 Operating expenses Selling expenses... $690,000 Administrative expenses ,000 Total operating expenses... 1,125,000 Income from operations ,000 Other revenues and gains Interest revenue... $45,000 Other expenses and losses Interest expense... $70,000 Loss on sale of equipment... 10,000 80,000 35,000 Net income... $ 210,000 (b) CHEVALIER COMPANY Income Statement For the Year Ended December 31, 2002 Revenues Net sales... $2,359,000 Interest revenue ,000 Total revenues... 2,404,000 Expenses Cost of goods sold... $989,000 Selling expenses ,000 Administrative expenses ,000 Interest expense... 70,000 Loss on sale of equipment ,000 Total expenses... 2,194,000 Net income... $ 210,
23 EXERCISE 5-10 (a) JETFORM CORPORATION Income Statement For the Year Ended April 30, 2000 (in thousands) Revenues Revenue from products and services... $94,317 Interest revenue... 2,868 Gain on sale of assets... 1,813 Other income Total revenues... $ 99,293 Expenses Cost of products and services... $24,426 Sales and marketing expenses... 45,097 General and administrative expenses... 26,485 Amortization expense... 10,300 Income tax expense... 1,086 Total expenses ,394 Net loss... ($ 8,101) 5-23
24 EXERCISE 5-10 (Continued) (b) JETFORM CORPORATION Income Statement For the Year Ended April 30, 2000 (in thousands) Revenue from products and services... $ 94,317 Cost of products and services... 00, 24,426 Gross profit... 69,891 Operating expenses Sales and marketing expenses... $45,097 General and administrative expenses (including amortization expense) ,785 Total operating expenses... 81,882 Loss from operations... (11,991) Other revenues and gains Interest revenue... $2,868 Gain on sale of assets... 1,813 Other income ,976 Other expenses and losses Income tax expense*... 1,086 3,890 Net loss... ($ 8,101) *Note to Instructor: You may wish to explain that income tax expense is usually presented differently (following an income (or loss) before income taxes caption) in corporate income statements. 5-24
25 EXERCISE 5-10 (Continued) (c) Gross profit margin = 74% ($69,891 $94,317) Profit margin = (8.6%) ($8,101 $94,317) Inventory turnover = 22 times ($24,426 $1,111) Days sales in inventory = 17 days (365 22) These results are misleading and likely overly high. The revenue includes revenue from services, in addition to products. Revenue from services does not have the same level of cost as does revenue from products. In other words, the revenue and costs from services does not have any cost of goods sold nor inventory. No further breakdown is available on Jetform s financial statements. These ratios are still useful in determining trends, when compared against similar calculations for prior years. 5-25
26 EXERCISE 5-11 Inventory turnover 2000 = 7.3 times [$1,298,606 ($193,831 + $160,092) 2] 1999 = 7.5 times [$1,546,723 ($160,092 + $254,690) 2] Days sales in inventory 2000 = 50 days ( ) 1999 = 49 days ( ) Gross profit margin 2000 = 23% [($1,683,142 - $1,298,606) $1,683,142] 1999 = 21% [($1,960,274 - $1,546,723) $1,960,274] The gross profit margin has improved, increasing from 21% in 1999 to 23% in The inventory turnover and days sales in inventory are basically unchanged from one year to the next. 5-26
27 *EXERCISE 5-12 Sept. 2 Merchandise Inventory (90 X $15)... 1, GST Recoverable ($1,350 x 7%) Accounts Payable... 1, Accounts Payable Merchandise Inventory GST Recoverable Accounts Receivable... 1, Sales (50 x $25) GST Payable ($1,250 x 7%) Cost of Goods Sold Merchandise Inventory (50 x $15) Accounts Receivable Sales (30 x $25) GST Payable ($750 x 7%) Cost of Goods Sold Merchandise Inventory (30 x $15) Merchandise Inventory (15 x $16) GST Recoverable ($240 x 7%) Accounts Payable Cost of Goods Sold (Inventory Loss) * Merchandise Inventory = 31 desk sets per records; 30 desk sets per count = 1 missing * Note: We assumed that the missing desk set had a cost of $15. It could also have been assumed to be $16, from the September 20 purchase. There is no GST effect of this loss. 5-27
28 *EXERCISE 5-13 (a) Accounts Cash Merchandise Inven. Sales Sales Returns Cost of Goods Sold Rent Expense Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit 9,000 80,000 10, ,000 42, ,000 10, ,000 42, ,000 9,000 80,000 (b) The accounts appearing in the post-closing trial balance are the balance sheet accounts of Cash ($9,000) and Merchandise Inventory ($80,000). 5-28
29 SOLUTIONS TO PROBLEMS (a) PROBLEM 5-1A April 5 Merchandise Inventory Custom Sedans (3 x $24,000)... 72,000 Accounts Payable... 72, Merchandise Inventory Recreation Vehicles (2 x $28,000)... 56,000 Accounts Payable... 56, Accounts Receivable ,000 Sales (4 x $28,500) ,000 Cost of Goods Sold (4 x $24,000)... 96,000 Merchandise Inventory Custom Sedans 96, Merchandise Inventory Convertibles (2 x $26,000)... 52,000 Accounts Payable... 52, Accounts Payable... 26,000 Merchandise Inventory Convertibles... 26, Accounts Receivable ,000 Sales (3 x $34,000) ,000 Cost of Goods Sold (3 x $28,000)... 84,000 Merchandise Inventory Recreation Vehicles 84, Accounts Receivable... 31,000 Sales... 31,000 Cost of Goods Sold... 26,000 Merchandise Inventory Convertibles... 26,
30 PROBLEM 5-1A (Continued) (b) Merchandise Inventory Custom Sedans Merchandise Inventory Convertibles Bal. 96,000 96,000 Bal. 78,000 26,000 72,000 52,000 26,000 72,000 78,000 Merchandise Inventory Recreation Vehicles Cost of Goods Sold Bal. 56,000 84,000 96,000 56,000 84,000 28,000 26, ,
31 PROBLEM 5-2A GENERAL JOURNAL Date Account Titles Ref. Debit Credit July 1 Merchandise Inventory (50 x $30)... Accounts Payable ,500 1,500 3 Accounts Receivable (40 x $50)... Sales ,000 2,000 Cost of Goods Sold (40 x $30)... Merchandise Inventory ,200 1,200 9 Accounts Payable... Cash ,500 1, Cash... Accounts Receivable ,000 2, Accounts Receivable (30 x $50)... Sales ,500 1,500 Cost of Goods Sold (30 x $30)... Merchandise Inventory Merchandise Inventory ($1,700 + $100).. Accounts Payable... Cash ,800 1, Accounts Payable... Merchandise Inventory Cash... Accounts Receivable ,500 1,
32 PROBLEM 5-2A (Continued) Date Account Titles Ref. Debit Credit July 22 Accounts Receivable (40 x $50)... Sales ,000 2,000 Cost of Goods Sold (40 x $30)... Merchandise Inventory ,200 1, Accounts Payable ($1,700 - $300)... Cash ,400 1, Sales Returns and Allowances... Accounts Receivable Merchandise Inventory... Cost of Goods Sold
33 PROBLEM 5-3A (a) GENERAL JOURNAL Date Account Titles Ref. Debit Credit Apr. 2 Merchandise Inventory... 4,900 Accounts Payable ,900 4 Accounts Receivable... Sales ,000 5,000 Cost of Goods Sold... Merchandise Inventory ,000 4,000 5 Freight Out... Cash Accounts Payable... Merchandise Inventory Merchandise Inventory... Cash ,400 4, Cash... Merchandise Inventory Merchandise Inventory... Accounts Payable ,200 4, Merchandise Inventory... Cash Cash... Sales ,400 6,400 Cost of Goods Sold... Merchandise Inventory ,200 5,
34 PROBLEM 5-3A (Continued) (a) (Continued) Date Account Titles Ref. Debit Credit Apr. 26 Merchandise Inventory... 2,300 Cash , Accounts Payable ($4,900 - $300)... Cash Cash... Accounts Receivable Sales Returns and Allowances... Cash... Merchandise Inventory... Cost of Goods Sold Accounts Receivable... Sales... Cost of Goods Sold... Merchandise Inventory ,600 5, ,700 3,000 4,600 5, ,700 3,000 (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance Apr Balance ,400 5, , ,300 4, ,000 8,800 4,400 4,900 4,800 11,200 8,900 4,300 9,300 9,210
35 PROBLEM 5-3A (Continued) (b) (Continued) Accounts Receivable No. 112 Date Explanation Ref. Debit Credit Balance Apr ,000 3,700 5,000 5, ,700 Merchandise Inventory No. Date Explanation Ref. Debit Credit Balance Apr ,900 4,400 4, , , ,200 3,000 4, ,000 4,500 8,700 8,800 3,600 5,900 5,960 2,960 Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance Apr ,600 4,900 4,200 4,900 4,600 8,800 4,
36 PROBLEM 5-3A (Continued) (b) (Continued) M. Nisson, Capital No. 301 Date Explanation Ref. Debit Credit Balance Apr. 1 Balance 9,000 Sales No. 401 Date Explanation Ref. Debit Credit Balance Apr ,000 6,400 3,700 5,000 11,400 15,100 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 ,000 5,200 3, ,000 9,200 9,140 12,140 Freight Out No. 644 Date Explanation Ref. Debit Credit Balance Apr
37 PROBLEM 5-3A (Continued) (c) NISSON DISTRIBUTING COMPANY Income Statement (Partial) For the Month Ended April 30, 2003 Sales revenues Sales... $15,100 Less: Sales returns and allowances Net sales... 15,010 Cost of goods sold... 12,140 Gross profit... $ 2,870 (d) NISSON DISTRIBUTING COMPANY Balance Sheet (Partial) April 30, 2003 Assets Current assets Cash... $ 9,210 Accounts receivable... 3,700 Merchandise inventory... 2,960 Total current assets... 15,
38 Adjusting entries not required: PROBLEM 5-4A Dec. 31 Insurance Expense Prepaid Insurance Amortization Expense... 3,000 Accumulated Amortization Store Equipment 3,000 Rent Expense Rent Payable (a) WORLD ENTERPRISES Income Statement For the Year Ended December 31, 2002 Sales revenues Sales... $238,500 Less: Sales returns and allowances ,600 Net sales ,900 Cost of goods sold ,000 Gross profit... 56,900 Operating expenses Salaries expense... $31,600 Amortization expense... 3,000 Rent expense ($6,100 + $500)... 6,600 Insurance expense Total operating expenses ,000 Net income... $14,900 WORLD ENTERPRISES Statement of Owner s Equity For the Year Ended December 31, 2002 R. Roger, Capital, January 1... $50,300 Add: Net income... 14,900 R. Roger, Capital, December $65,
39 PROBLEM 5-4A (Continued) (a) (Continued) WORLD ENTERPRISES Balance Sheet December 31, 2002 Assets Current assets Cash... $ 14,000 Accounts receivable... 30,600 Merchandise inventory... 27,500 Prepaid insurance ($1,800 $800)... 1,000 Total current assets... 73,100 Capital assets Equipment... $42,000 Less: Accumulated amortization Equipment 12,000 30,000 Total assets... $103,100 Liabilities and Owner's Equity Current liabilities Accounts payable ($34,400 + $500)... $ 34,900 Sales taxes payable... 3,000 Total current liabilities... 37,900 Owner's equity R. Roger, Capital... 65,200 Total liabilities and owner's equity... $103,
40 PROBLEM 5-4A (Continued) (b) Dec. 31 Sales ,500 R. Roger, Capital , R. Roger, Capital ,600 Sales Returns and Allowances... 4,600 Cost of Goods Sold ,000 Salaries Expense... 31,600 Rent Expense... 6,600 Insurance Expense Amortization Expense... 3,
41 PROBLEM 5-5A (a) DAIGLE DEPARTMENT STORE Income Statement For the Year Ended November 30, 2003 Sales revenues Sales... $850,000 Less: Sales returns and allowances... 10,000 Net sales ,000 Cost of goods sold ,220 Gross profit ,780 Operating expenses Selling expenses Salaries expense ($139,000 X 70%) $97,300 Sales commissions expense... 12,750 Amortization expense building 9,500 Delivery expense... 8,200 Insurance expense ($9,000 x 50%) 4,500 Amortization expense delivery equipment ,000 Total selling expenses... $136,250 Administrative expenses Salaries expense ($139,000 X 30%). $41,700 Utilities expense... 10,600 Insurance expense ($9,000 x 50%).. 4,500 Property tax expense... 3,500 Total administrative expenses. 0 60,300 Total operating expenses.. 196,550 Income from operations... 10,230 Other revenues and gains Interest revenue... $5,000 Other expenses and losses Interest expense... 8, ,000 Net income... $ 7,
42 PROBLEM 5-5A (Continued) (a) (Continued) DAIGLE DEPARTMENT STORE Statement of Owner's Equity For the Year Ended November 30, 2003 B. Daigle, Capital, December 1, $84,200 Add: Net income... 7,230 91,430 Less: Drawings ,000 B. Daigle, Capital, November 30, $79,
43 PROBLEM 5-5A (Continued) (a) (Continued) DAIGLE DEPARTMENT STORE Balance Sheet November 30, 2003 Assets Current assets Cash... $008,000 Accounts receivable... 11,770 Merchandise inventory... 36,200 Prepaid insurance... 4,500 Total current assets... 60,470 Capital assets Land... $50,000 Building... $125,000 Less: Accumulated amortization building ,800 83,200 Delivery equipment... $57,000 Less: Accumulated amortization delivery equipment... 19, ,320 Total capital assets ,520 Total assets... $230,990 Liabilities and Owner's Equity Current liabilities Accounts payable... $ 47,310 Property taxes payable... 3,500 Sales commissions payable... 4,750 Current portion of mortgage... 6,000 Total current liabilities... 61,560 Long-term liabilities Mortgage payable ,000 Total liabilities ,560 Owner's equity B. Daigle, Capital ,430 Total liabilities and owner's equity... $230,
44 PROBLEM 5-5A (Continued) (b) Nov. 30 Amortization Expense Delivery Equip... 4,000 Amortization Expense Building... 9,500 Accum. Amortiz. Delivery... 4,000 Accum. Amortiz. Building... 9, Insurance Expense... 9,000 Prepaid Expense... 9, Property Tax Expense... 3,500 Property Tax Payable... 3, Sales Commissions Expense... 4,750 Sales Commissions Payable... 4,750 (c) Nov. 30 Sales ,000 Interest Revenue... 5,000 B. Daigle, Capital ,000 Nov. 30 B. Daigle, Capital ,770 Sales Returns and Allowances... 10,000 Cost of Goods Sold ,220 Salaries Expense ,000 Amortization Expense Delivery Equipment... 4,000 Delivery Expense... 8,200 Sales Commission Expense... 12,750 Amortization Expense Store Equipment... 9,500 Insurance Expense... 9,000 Property Tax Expense... 3,500 Utilities Expense... 10,600 Interest Expense... 8, B. Daigle, Capital... 12,000 B. Daigle, Drawings... 12,
45 PROBLEM 5-6A Account Statement Classification Accounts Payable Balance Sheet Current Liabilities Accounts Receivable Balance Sheet Current Assets Accumulated Amortization Office Building Accumulated Amortization Store Equipment Balance Sheet Balance Sheet Capital Assets (Contra Account) Capital Assets (Contra Account) Advertising Expense Income Statement Selling Expenses Amortization Expense Office Building Amortization Expense Store Equipment Income Statement Income Statement Administrative Expenses Selling Expenses Cash Balance Sheet Current Assets Swirsky, Capital Balance Sheet Owner s Equity Freight Out Income Statement Selling Expenses Swirsky, Drawings Statement of Owner s Equity Drawings Income Tax Expense Income Statement Other Expenses Income Tax Payable Insurance Expense Balance Sheet Income Statement Current Liabilities Administrative Expenses Interest Expense Income Statement Other Expenses Interest Payable Balance Sheet Current Liabilities 5-45
46 Account Statement Classification Land Balance Sheet Capital Assets Merchandise Inventory Balance Sheet Current Assets Mortgage Payable Balance Sheet Long-Term Liability Office Building Balance Sheet Capital Assets Prepaid Insurance Balance Sheet Current Assets Salaries Expense Office Staff Salaries Expense Store Staff Income Statement Income Statement Administrative Expenses Selling Expenses Salaries Payable Balance Sheet Current Liabilities Sales Returns and Allowances Income Statement Contra Revenue Store Equipment Balance Sheet Capital Assets Utilities Expense Office Income Statement Administrative Expenses Utilities Expense Store Income Statement Selling Expenses Wages Payable Balance Sheet Current Liabilities 5-46
47 PROBLEM 5-7A (a) MCGRATH COMPANY Income Statement For the Year Ended December 31, 2002 Sales revenues Sales... $800,000 Less: Sales returns and allowances... 30,000 Net sales ,000 Cost of goods sold ,000 Gross profit ,000 Operating expenses Selling expenses Sales salaries expense ($80,000 + $16,000)... $96,000 Delivery expense... 30,000 Advertising expense... 10,000 Sales commissions expense... 6,000 $142,000 Administrative expenses Office salaries expense... $27,000 Rent expense... 24,000 Utilities expense... 12,000 Amortization expense office equip. 8,000 71,000 Total operating expenses ,000 Income from operations... 2,000 Other revenues and gains Rent revenue... $40,000 Other expenses and losses Interest expense... 2,000 38,000 Net income... $ 40,
48 PROBLEM 5-7A (Continued) (b) MCGRATH COMPANY Income Statement For the Year Ended December 31, 2002 Revenues Net sales... $770,000 Rent revenue... 40,000 $810,000 Expenses Cost of sales... $555,000 Selling expenses ($80,000 + $16,000 + $30,000 + $10,000 + $6,000) 142,000 Administrative ($27,000 + $24,000 + $12,000 + $8,000)... 71,000 Interest expense... 2, ,000 Net income... $ 40,
49 PROBLEM 5-8A (a) Gross profit margin 19.5% ($949,263 - $764,198) $949, % ($808,251 $615,827) $808,251 Inventory turnover 3.5 times $764,198 [($225,958 + $212,382) 2] 3.3 times $615,827 [($212,382 + $164,557) 2] Days sales in inventory days 365 days 3.5 times days 365 days 3.3 times (b) IPSCO s gross profit margin declined in However, its management of its inventories improved. It s inventory turned over (sold) faster in 2000 and the number of days sales in inventory declined from days to days. This means that IPSCO is not holding its inventory for as long in 2000, as it did in The faster you sell your inventory, the faster the company will collect cash/receivables, the lower its carrying costs, and the reduced risk of inventory obsolescence. 5-49
50 *PROBLEM 5-9A GENERAL JOURNAL Date Account Titles and Explanation Ref. Debit Credit Sept. 2 GST Recoverable... Merchandise Inventory... Accounts Payable... 4 Merchandise Inventory... Cash... 5 Accounts Payable... Merchandise Inventory... GST Recoverable... 6 Accounts Receivable... Sales... GST Payable... PST Payable... Cost of Goods Sold... Merchandise Inventory GST Recoverable... Supplies [$4,000 + (5% x $4,000)]... Cash GST Recoverable... Merchandise Inventory... Cash Accounts Receivable... Sales... GST Payable (7% x $28,000)... PST Payable (5% x $28,000)... Cost of Goods Sold... Merchandise Inventory ,200 60,000 02,000 07,490 23,520 15, , ,000 31,360 20,000 64,200 02,000 07, ,000 1,470 1,050 15,000 04,480 06,420 28,000 1,960 1,400 20,000
51 *PROBLEM 5-9A (Continued) Date Account Titles and Explanation Ref. Debit Credit Sept. 27 Delivery Equipment [$30,000 + (5% x $30,000)]... GST Recoverable (7% x $30,000)... Accounts Payable... 31,500 2,100 33, Accounts Payable ($64,200 $7,490)... Cash Cash... Accounts Receivable... 56, ,710 23,520 00, 23,
52 (a) *PROBLEM 5-10A GENERAL JOURNAL Date Account Titles and Explanation Ref. Debit Credit April 4 GST Recoverable... Merchandise Inventory... Accounts Payable Merchandise Inventory... Cash Accounts Receivable... Sales... GST Payable... PST Payable , Cost of Goods Sold... Merchandise Inventory Accounts Payable... Merchandise Inventory... GST Recoverable ($40 X 7%) GST Recoverable... Merchandise Inventory... Cash GST Recoverable... Merchandise Inventory... Accounts Payable Cash... Merchandise Inventory... GST Recoverable Merchandise Inventory... Cash
53 *PROBLEM 5-10A (Continued) (a) (Continued) Date Account Titles and Explanation Ref. Debit Credit April 18 Accounts Receivable... Sales... GST Payable... PST Payable Cost of Goods Sold... Merchandise Inventory Cash... Accounts Receivable GST Payable... PST Payable... Sales Returns and Allowances... Accounts Receivable Merchandise Inventory... Cost of Goods Sold Accounts Payable... Cash Accounts Receivable... Sales... GST Payable... PST Payable , , Cost of Goods Sold... Merchandise Inventory Cash... Accounts Receivable , ,
54 *PROBLEM 5-10A (Continued) (b) Cash No. 101 Date Explanation Ref. Debit Credit Balance Apr Balance , , , , , , , , , Accounts Receivable No. 112 Apr Explanation Ref. Debit Credit Balance 1, , , , , , , , , GST Recoverable No. 114 Date Explanation Ref. Debit Credit Balance Apr
55 *PROBLEM 5-10A (Continued) (b) (Continued) Merchandise Inventory No. Date Explanation Ref. Debit Credit Balance Apr Balance , , , , , , , , , , , , Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance Apr , GST Payable No. 214 Date Explanation Ref. Debit Credit Balance Apr
56 *PROBLEM 5-10A (Continued) (b) (Continued) PST Payable No. 215 Date Explanation Ref. Debit Credit Balance Apr B. J. Evert, Capital No. 301 Date Explanation Ref. Debit Credit Balance Apr. 1 Balance 6, Sales No. 401 Date Explanation Ref. Debit Credit Balance Apr , , , , 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 , , , ,
57 *PROBLEM 5-10A (Continued) (c) B. J.'S TENNIS SHOP Trial Balance April 30, 2003 Cash... Accounts Receivable... GST Recoverable... Merchandise Inventory... Accounts Payable... GST Payable... PST Payable... B. J. Evert, Capital... Sales... Sales Returns and Allowances... Cost of Goods Sold... Debit $3, , , , $9, Credit $ , , $9, (d) B. J.'S TENNIS SHOP Income Statement (Partial) For the Month Ended April 30, 2003 Sales revenues Sales... $2,700 Less: Sales returns and allowances Net sales... 2,670 Cost of goods sold... 1,895 Gross profit
58 (a) *PROBLEM 5-11A Account Titles Trial Balance Adjustments Cash Accounts Receivable Merchandise Inventory Land Buildings Accum. Amortization Equipment Accum. Amortization Notes Payable Accounts Payable G. Metis, Capital G. Metis, Drawings Sales Cost of Goods Sold Salaries Expense Utilities Expense Repair Expense Gas and Oil Expense Insurance Expense Totals Amort. Expense Bldings Amort. Expense Equip. Interest Expense Interest Payable Totals Net Income Totals METIS WHOLESALE COMPANY Work Sheet For the Year Ended December 31, 2002 Adjusted Trial Balance Income Statement Balance Sheet Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 33,400 37,600 92,400 92, ,000 83,500 10, ,100 69,800 9,400 5,900 7,200 0,00 3,500 1,353,800 54,000 42,400 50,000 37, , , ,353,800 (3) 2,400 (1) 10,000 (1) 9,000 (2) 4, ,400 (3) 2,400 (1) 10,000 (1) 9,000 (2) 04,000 25,400 33,400 37,600 90,000 92, ,000 83,500 10, ,500 69,800 9,400 5,900 7,200 3,500 10,000 9,000 4, ,376,800 64,000 51,400 50,000 37, , ,100 0,004,000 1,376, ,500 69,800 9,400 5,900 7,200 3,500 10,000 9,000 4, , , , , , ,100 33,400 37,600 90,000 92, ,000 83,500 10, , ,500 64,000 51,400 50,000 37, , , , , ,500 Key: (1) Amortization expense buildings, (1) Amortization expense equipment, (2) Interest payable., (3) Inventory adjustment. 5-58
59 *PROBLEM 5-11A (Continued) (b) METIS WHOLESALE COMPANY Income Statement For the Year Ended December 31, 2002 Sales... $902,100 Cost of goods sold ,500 Gross profit ,600 Operating expenses Selling expenses Salaries expense ($69,800 X 80%)... $55,840 Gas and oil expense ,200 Total selling expenses... $63,040 Administrative expenses Salaries expense ($69,800 X 20%)... $13,960 Amortization expense buildings... 10,000 Utilities expense... 9,400 Amortization expense equipment... 9,000 Repair expense... 5,900 Insurance expense... 3,500 Total administrative expenses ,760 Total operating expenses ,800 Income from operations... 72,800 Other expenses and losses Interest expense ,000 Net income... $ 68,800 METIS WHOLESALE COMPANY Statement of Owner s Equity For the Year Ended December 31, 2002 G. Metis, Capital January 1... $267,800 Add: Net income... 68, ,600 Less: Drawings... 10,000 G. Metis, Capital December $326,
60 *PROBLEM 5-11A (Continued) (b) (Continued) METIS WHOLESALE COMPANY Balance Sheet December 31, 2002 Assets Current assets Cash... $ 33,400 Accounts receivable... 37,600 Merchandise inventory... 90,000 Total current assets ,000 Capital assets Land... $ 92,000 Buildings... $197,000 Less: Accumulated amortization... (64,000) 133,000 Equipment... 83,500 Less: Accumulated amortization... (51,400) 32, ,100 Total assets... $418,100 Liabilities and Owner s Equity Current liabilities Notes payable... $ 50,000 Accounts payable... 37,500 Interest payable... 4,000 Total liabilities... 91,500 Owner s Equity G. Metis Capital ,600 Total liabilities and owner s equity... $418,
61 *PROBLEM 5-11A (Continued) (c) Dec. 31 Amortization Expense Building... 10,000 Accum. Amortiz. Building... 10,000 Amortization Expense Equipment... 9,000 Accum. Amortiz. Equipment... 9,000 Interest Expense... 4,000 Interest payable... 4,000 Cost of Goods Sold... 2,400 Merchandise Inventory... 2,400 (d) Dec. 31 Sales ,100 G. Methis, Capital ,100 G. Metis, Capital ,300 Cost of Goods Sold ,500 Salaries Expense... 69,800 Utilities Expense... 9,400 Repair Expense... 5,900 Gas and Oil Expense... 7,200 Insurance Expense... 3,500 Amortization Expense Buildings 10,000 Amortization Expense Equipment 9,000 Interest Expense... 4,000 G. Metis, Capital... 10,000 G. Metis, Drawings... 10,
62 *PROBLEM 5-11A (Continued) (e) METIS WHOLESALE COMPANY Post-Closing Trial Balance December 31, 2002 Debit Credit Cash... $ 33,400 Accounts Receivable... 37,600 Merchandise Inventory... 90,000 Land... 92,000 Buildings ,000 Accumulated Amortization Buildings... $ 64,000 Equipment... 83,500 Accumulated Amortization Equipment... 51,400 Notes Payable... 50,000 Accounts Payable... 37,500 Interest Payable... 4,000 G. Metis, Capital ,600 Totals $533,500 $533,
63 (a) PROBLEM 5-1B June 5 Merchandise Inventory Jet Runners (2 x $22,000)... 44,000 Accounts Payable... 44, Merchandise Inventory Skiffs (2 x $25,000)... 50,000 Accounts Payable... 50, Accounts Receivable (4 x $26,500) ,000 Sales ,000 Cost of Goods Sold (4 x $22,000)... 88,000 Merchandise Inventory Jet Runners.. 88, Merchandise Inventory Skiffs (2 x $26,000)... 52,000 Accounts Payable... 52, Accounts Payable... 26,000 Merchandise Inventory Skiffs... 26, Accounts Receivable (2 x $33,000)... 66,000 Sales... 66,000 Cost of Goods Sold (2 x $27,000)... 54,000 Merchandise Inventory Power... 54, Accounts Receivable (3 x $29,000)... 87,000 Sales... 87,000 Cost of Goods Sold (3 x $24,000)... 72,000 Merchandise Inventory Skiffs... 72,
64 PROBLEM 5-1B (Continued) (b) Merchandise Inventory Jet Runners Merchandise Inventory Skiffs Bal. 88,000 88,000 Bal. 72,000 26,000 44,000 50,000 72,000 44,000 52,000 76,000 Merchandise Inventory Power Cost of Goods Sold Bal. 54,000 54,000 88, ,000 72, ,
65 PROBLEM 5-2B GENERALJOURNAL Date Account Titles Ref. Debit Credit June 1 Merchandise Inventory (130 x $5)... Accounts Payable... Merchandise Inventory... Cash... 3 Accounts Receivable (140 x $10)... Sales... Cost of Goods Sold (140 x $6)... Merchandise Inventory... 6 Accounts Payable... Merchandise Inventory... 9 Accounts Payable... Cash Cash... Accounts Receivable Accounts Receivable ( x $10)... Sales... Cost of Goods Sold... Merchandise Inventory Merchandise Inventory ( x $5)... Accounts Payable Cash... Accounts Receivable , ,400 1, , , ,400 1, ,
66 PROBLEM 5-2B (Continued) Date Account Titles Ref. Debit Credit June 26 Accounts Payable... Cash Accounts Receivable (110 x $10)... Sales ,100 1,100 Cost of Goods Sold... Merchandise Inventory Sales Returns and Allowances... Accounts Receivable Merchandise Inventory... Cost of Goods Sold
67 PROBLEM 5-3B (a) GENERAL JOURNAL Date Account Titles and Explanation Ref. Debit Credit May 1 Merchandise Inventory... Accounts Payable ,000 5,000 2 Accounts Receivable... Sales ,000 4,000 Cost of Goods Sold... Merchandise Inventory ,000 3,000 5 Accounts Payable... Merchandise Inventory ,200 0,200 7 Freight Out... Cash Supplies... Cash ,900 0, Merchandise Inventory... Cash ,400 2, Cash... Merchandise Inventory ,230 0, Merchandise Inventory... Accounts Payable ,900 1, Merchandise Inventory... Cash ,250 0,
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