Question Details

Business A 654 CHAPTER 5 PART 12

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS

EXERCISES
Ex. 202
For each of the following, determine the missing amounts.  Sales 	Cost of	  Gross	Operating	Net 
Revenue	Goods Sold	_Profit 	Expenses	Income
1.	$100,000	________	_______	$30,000	$12,000  2.	________	$135,000	$125,000	_______	$80,000 

Ex. 203
On October 1, Benji- Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $200 each. During the month of October, the following transactions occurred.

Oct.	4	Purchased 40 bicycles at a cost of $200 each from Monrue Bicycle Company, terms 1/10, n/30.
	6 	Sold 25 bicycles to Team Wisconsin for $330 each, terms 2/10, n/30.
	7	Received credit from Monrue Bicycle Company for the return of 2 defective bicycles.
	13	Issued a credit memo to Team Wisconsin for the return of a defective bicycle.
	14	Paid Monroe Bicycle Company in full, less discount.

Instructions
Prepare the journal entries to record the transactions assuming the company uses a perpetual inventory system.


Ex. 204
On September 1, Reid Supply had an inventory of 15 backpacks at a cost of $20 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred.

Sept.	4	Purchased 70 backpacks at $20 each from Hunter, terms 2/10, n/30.

Sept.	6	Received credit of $100 for the return of 5 backpacks purchased on Sept. 4 that were defective.

Sept.	9	Sold 40 backpacks for $35 each to Oliver Books, terms 2/10, n/30.

Sept.	13	Sold 15 backpacks for $35 each to Heller Office Supply, terms n/30.

Sept.	14	Paid Hunter in full, less discount.

Instructions
Journalize the September transactions for Reid Supply.


Ex. 205
Sam Wainwright is a new accountant with Ground floor Company. Ground floor purchased merchandise on account for $18,000. The credit terms are 1/10, n/30. Sam has talked with the company's banker and knows that he could earn 4% on any money invested in the company's savings account.

Instructions
(a)	Should Sam pay the invoice within the discount period or should he keep the $18,000 in the money market account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best.

(b)	If Sam forgoes the discount, it may be viewed as paying an interest rate of 2% for the use of $18,000for 20 days. Calculate the annual rate of interest that this is equivalent to.


Ex. 206
(a)	Karns Company purchased merchandise on account from Bailey Office Suppliers for $174,000, with terms of 2/10, n/30. During the discount period, Karns returned some merchandise and paid $156,800 as payment in full. Karns uses a perpetual inventory system. Prepare the journal entries that Karns Company made to record:
	(1)	the purchase of merchandise.
	(2)	the return of merchandise.
	(3)	the payment on account.

(b)	Hinds Company sold merchandise to Peter Company on account for $146,000 with credit terms of ?/10, n/30. The cost of the merchandise sold was $86,140. During the discount period, Peter Company returned $6,000 of merchandise and paid its account in full (minus the discount) by remitting $137,200 in cash. Both companies use a perpetual inventory system. Prepare the journal entries that Hinds Company made to record:
	(1)	the sale of merchandise.
	(2)	the return of merchandise.
	(3)	the collection on account.


Ex. 207
An inexperienced accountant for Tilly Company made the following errors in recording merchandising transactions.
1.	A $270 refund to a customer for faulty merchandise was debited to Sales Revenue $270 and credited to Cash $270.
2.	A $310 credit purchase of supplies was debited to Inventory $310 and credited to Cash $310.
3.	A $190 sales return was debited to Sales Revenue.
4.	A cash payment of $40 for freight on merchandise purchases was debited to Freight-Out $400 and credited to Cash $400.

Instructions
Prepare separate correcting entries for each error, assuming that the incorrect entry is not reversed. (Omit explanations.)


Ex. 208
Prepare the necessary journal entries to record the following transactions, assuming Dakin Company uses a perpetual inventory system.
(a)	Purchased $35,000 of merchandise on account, terms 2/10, n/30. (b)	Returned $700 of damaged merchandise for credit. (c)	Paid for the merchandise purchased within 10 days. 

Ex. 209
Prepare the necessary journal entries to record the following transactions, assuming Eustace Company uses a perpetual inventory system.
(a)	Eustace sells $45,000 of merchandise, terms 1/10, n/30. The merchandise cost $30,000.
(b)	The customer in (a) returned $4,000 of merchandise to Eustace. The merchandise returned cost $2,400.
(c)	Eustace received the balance due within the discount period.


Ex. 210
Newell Company completed the following transactions in October:

	       Credit Sales 		     Sales Returns		Date of
	  Date   	Amount	  Terms   	  Date  	Amount	Collection
	Oct.	3	$  600	2/10, n/30			Oct.	8
	Oct.	11	1,700	3/10, n/30	Oct. 14	$  400	Oct.	16
	Oct.	17	5,000	1/10, n/30	Oct. 20	1,000	Oct.	29
	Oct.	21	1,400	2/10, n/60	Oct. 23	200	Oct.	27
	Oct.	23	2,300	2/10, n/30	Oct. 27	400	Oct.	28

Instructions
(a)	Indicate the cash received for each collection. Show your calculations.
(b)	Prepare the journal entry for the
	(1)	Oct. 17 sale. The merchandise sold had a cost of $3,500.
	(2)	Oct. 23 sales return. The merchandise returned had a cost of $140.
	(3)	Oct. 28 collection.
Newell uses a perpetual inventory system.


Ex. 211
The following information is available for Moiz Company:
	    Debit    	  Credit	
Owner- Capital		$  50,000
Owner- Drawings	$  30,000
Sales Revenue		510,000
Sales Returns and Allowances	20,000
Sales Discounts	7,000
Cost of Goods Sold	310,000
Freight-Out	2,000
Advertising Expense	15,000
Interest Expense	19,000
Salaries and Wages Expense	55,000
Utilities Expense	18,000
Depreciation Expense	7,000
Interest Revenue		23,000

Instructions
Using the above information, prepare the closing entries for Moiz Company.


Ex. 212
The adjusted trial balance of J. W. Hatch Company appears below.

J. W. HATCH
Adjusted Trial Balance
December 31, 2014
	  Debit  		  Credit	
Cash	12,000
Accounts Receivable	25,000
Inventory	35,000
Buildings	140,000
Accumulated Depreciation—
  Buildings		20,000
Accounts Payable		12,000
Owner- Capital		144,000
Owner- Drawings	30,000
Sales Revenue		310,000
Sales Discounts	6,000
Sales Returns & Allowances	8,000
Cost of Goods Sold	188,000
Operating Expenses	  42,000	             	
	486,000	486,000

Instructions
Using the information given, prepare the year-end closing entries.


Ex. 213
Kennedy Company had the following account balances at year-end: cost of goods sold $85,000; inventory $15,000; operating expenses $39,000; sales revenue $144,000; sales discounts $1,600; and sales returns and allowances $2,300. A physical count of inventory determines that inventory on hand is $14,400.

Instructions
(a)	Prepare the adjusting entry necessary as a result of the physical count.
(b)	Prepare closing entries.


Ex. 214
Financial information is presented below for two different companies.

	Gower	Martini
	Drugs	Food and Liquor
Sales revenue	$90,000	$       (e)
Sales returns and allowances 	(a)	3,000
Net sales	86,000	95,000
Cost of goods sold	56,000	(f)
Gross profit	(b)	36,000
Operating expenses	22,000	(g)
Income from operations	(c)	(h)
Other expenses and losses	4,000	7,000
Net income	(d)	11,000
Ex. 214	(Cont)

Instructions
Determine the missing amounts.


Ex. 215
Presented below is information for Annie Company for the month of March 2015.

Cost of goods sold	$245,000	Rent expense	$  36,000
Freight-out	7,000	Sales discounts	8,000
Insurance expense	5,000	Sales returns and allowances	11,000
Salaries and wages expense	63,000	Sales revenue	410,000

Instructions
(a)	Prepare a multiple -step income statement.
(b)	Compute the gross profit rate.


Ex. 216
In 2014, Rondelli Company had net sales of $650,000 and cost of goods sold of $455,000. Operating expenses were $150,000, and interest expense was $10,000. Rondelli prepares a multiple-step income statement.

Instructions
(a)	Compute Rondelli gross profit.
(b)	Compute the gross profit rate.
(c)	What is Rondelli income from operations and net income?
(d)	If Rondelli prepared a single-step income statement, what amount would it report for net income?

Ex. 217
Argentina Company gathered the following condensed data for the year ended December 31, 2014:

	Cost of goods sold	$   750,000
	Net sales	1,200,000
	Operating expenses	275,000
	Interest expense	48,000
	Dividend revenue	38,000
	Casualty loss from vandalism	125,000

Instructions
1.	Prepare a single-step income statement for the year ended December 31, 2014.
2.	Prepare a multiple-step income statement for the year ended December 31, 2014.


Ex. 218
Instructions
State the missing items identified by ?.
	1.	Gross profit - Operating expenses = ?
	2.	Cost of goods sold + Gross profit on sales = ?
	3.	Sales Revenue - (? + ?) = Net sales
	4.	Income from operations + ? - ? = Net income
	5.	Net sales - Cost of goods sold = ?


Ex. 219
The adjusted trial balance of Nick Company contained the following information:
	  Debit	    	   Credit	
Sales Revenue		$570,000
Sales Returns and Allowances	$  15,000
Sales Discounts	7,000
Cost of Goods Sold	323,000
Freight-Out	2,000
Advertising Expense	15,000
Interest Expense	18,000
Salaries and Wages Expense	85,000
Utilities Expense	28,000
Depreciation Expense	7,000
Interest Revenue		27,000
Instructions
1.	Use the above information to prepare a multiple-step income statement for the year ended December 31, 2014.

2.	Prepare a single-step income statement for the year ended December 31, 2014.

Ex. 220
The following information is available for Sheldon Leonard Company:
 Operating expenses	$  85,000 Cost of goods sold	  200,000 Sales	  325,000 
Sales returns and allowances	16,000 
Instructions Compute each of the following: (a)	Net sales (b)	Gross profit (c)	Income from operations 


aEx. 221
The adjusted trial balance of Dailey Music Company appears below. Dailey Music Company prepares monthly financial statements and uses the perpetual inventory method.
Instructions
Complete the worksheet below.
DAILEY MUSIC COMPANY
Worksheet
For the Month Ended April 30, 2014

	Adjusted
	   Trial Balance   	Income Statement	  Balance Sheet	
	Debit	Credit	Debit	Credit	Debit	Credit	
Cash	11,000
Inventory	19,000
Supplies	3,500
Equipment	80,000
Accum. Depreciation—
  Equipment		15,000
Accounts Payable		20,000
Owner- Capital		92,000
Owner- Drawings	8,000
Sales Revenue		39,000
Sales Discounts	2,000
Cost of Goods Sold	23,000
Advertising Expense	7,000
Supplies Expense	6,000
Depreciation Expense	1,000
 
Ex. 221	(Cont.)

Rent Expense	2,500
Utilities Expense	    1,000		
	166,000  	166,000
									
								


aEx. 222
Three items are missing in each of the following columns and are identified by letter.
Sales revenue	$        (a)	$840,000
Sales returns and allowances	15,000	22,000
Sales discounts	10,000	15,000
Net sales	440,000	(d)
Beginning inventory	(b)	300,000
Cost of goods purchased	220,000	(e)
Ending inventory	170,000	303,000
Cost of goods sold	252,000	575,000
Gross profit	(c)	(f)
Ex. 222	(Cont.)

Instructions
Calculate the missing amounts and identify them by letter.



aEx. 223
Reineman Supply Company uses a periodic inventory system. During September, the following transactions and events occurred.

Sept.	3	Purchased 90 backpacks at $25 each from Zuzu Company, terms 2/10, n/30.
Sept.	6	Received credit of $150 for the return of 6 backpacks purchased on Sept. 3 that were defective.
Sept.	9	Sold 15 backpacks for $42 each to Bailey Books, terms 2/10, n/30.
Sept.	13	Paid Zuzu Company in full.

Instructions
Journalize the September transactions for Reineman Supply Company.


aEx. 224
The following information is available for Hopkins Company:
Beginning inventory	$  45,000 Ending inventory	70,000 Freight-in	10,000 Purchases	290,000 Purchase returns and allowances	8,000
Ex. 224	(Cont.)

Instructions Compute each of the following: (a)	Net purchases (b)	Cost of goods purchased (c)	Cost of goods sold 
Ex. 225
The income statement of Jue- Luggage. includes the items listed below:
	Net sales	$900,000
	Gross profit	315,000
	Beginning inventory	80,000
	Purchase discounts	15,000
	Purchase returns and allowances	8,000
	Freight-in	10,000
	Operating expenses	300,000
	Purchases	560,000

Instructions
Use the appropriate items listed above as a basis for determining:
(a)	Cost of goods sold.
(b)	Cost of goods available for sale.
(c)	Ending inventory.


aEx. 226
Prepare the necessary journal entries to record the following transactions, assuming a periodic inventory system:
(a)	Purchased $450,000 of merchandise on account, terms 2/10, n/30.
(b)	Returned $30,000 of damaged merchandise for credit.
(c)	Paid for the merchandise purchased within 10 days.