ACC 211 Week 3 Chapter 4 Problem

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ACC 211 Week 3 Chapter 4 Problem | Accounting Assignment Help | Liberty University

Liberty University / ACCT 211
08 Feb 2019
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ACC 211 Week 3 Chapter 4 Problem | Accounting Assignment Help | Liberty University

Chapter 4 Problems

Question 1

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

July	1	Purchased merchandise from Boden Company for $6,900 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1.
	2	Sold merchandise to Creek Co. for $1,000 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $575.
	3	Paid $105 cash for freight charges on the purchase of July 1.
	8	Sold merchandise that had cost $2,200 for $2,600 cash.
	9	Purchased merchandise from Leight Co. for $2,700 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
	11	Received a $700 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.
	12	Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.
	16	Paid the balance due to Boden Company within the discount period.
	19	Sold merchandise that cost $1,000 to Art Co. for $1,500 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
	21	Issued a $250 credit memorandum to Art Co. for an allowance on goods sold on July 19.
	24	Paid Leight Co. the balance due, net of discount.
	30	Received the balance due from Art Co. for the invoice dated July 19, net of discount.
	31	Sold merchandise that cost $5,700 to Creek Co. for $6,900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Question 2

Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Aron.)

Aug.	1	Purchased merchandise from Aron Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
	5	Sold merchandise to Baird Corp. for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,000.
	8	Purchased merchandise from Waters Corporation for $5,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.
	9	Paid $100 cash for shipping charges related to the August 5 sale to Baird Corp.
	10	Baird returned merchandise from the August 5 sale that had cost Lowe’s $500 and was sold for $1,000. The merchandise was restored to inventory.
	12	After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of $500 off the $5,000 of goods purchased.
	14	At Aron’s request, Lowe’s paid $270 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron.
	15	Received balance due from Baird Corp. for the August 5 sale less the return on August 10.
	18	Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.
	19	Sold merchandise to Tux Co. for $3,600 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,800.
	22	Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $600 credit memorandum toward the $3,600 invoice to resolve the issue.
	29	Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22.
	30	Paid Aron Company the amount due from the August 1 purchase.

Question 3

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

	Debit		Credit
Merchandise inventory	$	41,000
Other (noninventory) assets		164,000
Total liabilities			$	47,355
Common stock				10,000
Retained earnings				124,560
Dividends		8,000
Sales				280,440
Sales discounts		4,291
Sales returns and allowances		18,509
Cost of goods sold		108,210
Sales salaries expense		38,420
Rent expense—Selling space		13,181
Store supplies expense		3,365
Advertising expense		23,837
Office salaries expense		35,055
Rent expense—Office space		3,365
Office supplies expense		1,122
Totals	$	462,355	$	462,355

On August 31, 2016, merchandise inventory was $33,087. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.

Invoice cost of merchandise purchases	$	120,540
Purchases discounts received		2,531
Purchases returns and allowances		5,786
Costs of transportation-in		3,900

Required:

1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

Question 4

Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.

	Debit		Credit
Merchandise inventory	$	40,600
Other (noninventory) assets		60,720
Total liabilities			$	24,200
Common stock				16,560
Retained earnings				20,700
Dividends		8,700
Sales				225,300
Sales discounts		2,290
Sales returns and allowances		13,000
Cost of goods sold		73,700
Sales salaries expense		32,600
Rent expense—Selling space		8,200
Store supplies expense		1,700
Advertising expense		12,500
Office salaries expense		28,700
Rent expense—Office space		3,700
Office supplies expense		350
Totals	$	286,760	$	286,760

On August 31, 2016, merchandise inventory was $25,600. Supplementary records of merchandising activities for the year ended August 31, 2017, reveal the following itemized costs.


Invoice cost of merchandise purchases	$	91,700
Purchases discounts received		3,000
Purchases returns and allowances		4,900
Costs of transportation-in		4,900

Required:

1. Prepare closing entries as of August 31, 2017 (the perpetual inventory system is used).

Question 5

[The following information applies to the questions displayed below.]

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.

NELSON COMPANY Unadjusted Trial Balance January 31, 2017
	Debit		Credit
Cash	$	37,050
Merchandise inventory		14,000
Store supplies		6,000
Prepaid insurance		2,200
Store equipment		42,700
Accumulated depreciation—Store equipment			$	19,350
Accounts payable				15,000
Common stock				3,800
Retained earnings				19,000
Dividends		2,100
Sales				145,200
Sales discounts		2,050
Sales returns and allowances		2,250
Cost of goods sold		38,000
Depreciation expense—Store equipment		0
Salaries expense		30,600
Insurance expense		0
Rent expense		16,000
Store supplies expense		0
Advertising expense		9,400
Totals	$	202,350	$	202,350

Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.

Additional Information:

Store supplies still available at fiscal year-end amount to $2,350.
Expired insurance, an administrative expense, for the fiscal year is $1,750.
Depreciation expense on store equipment, a selling expense, is $1,500 for the fiscal year.
To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,500 of inventory is still available at fiscal year-end.

Required:

1. Using the above information prepare adjusting journal entries:
2. Prepare a multiple-step income statement for fiscal year 2017.
3. Prepare a single-step income statement for fiscal year 2017.

Question 6

[The following information applies to the questions displayed below.]

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.

NELSON COMPANY Unadjusted Trial Balance January 31, 2017
	Debit		Credit
Cash	$	37,050
Merchandise inventory		14,000
Store supplies		6,000
Prepaid insurance		2,200
Store equipment		42,700
Accumulated depreciation—Store equipment			$	19,350
Accounts payable				15,000
Common stock				3,800
Retained earnings				19,000
Dividends		2,100
Sales				145,200
Sales discounts		2,050
Sales returns and allowances		2,250
Cost of goods sold		38,000
Depreciation expense—Store equipment		0
Salaries expense		30,600
Insurance expense		0
Rent expense		16,000
Store supplies expense		0
Advertising expense		9,400
Totals	$	202,350	$	202,350

Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.

Additional Information:

Store supplies still available at fiscal year-end amount to $2,350.
Expired insurance, an administrative expense, for the fiscal year is $1,750.
Depreciation expense on store equipment, a selling expense, is $1,500 for the fiscal year.
To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,500 of inventory is still available at fiscal year-end.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017

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