Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
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236 Part One The Basic Structure of <strong>Accounting</strong><br />
June 22 Received merch<strong>and</strong>ise returned from <strong>the</strong> customer from <strong>the</strong> June 18 sale,<br />
$800 (cost, $480). Merch<strong>and</strong>ise was <strong>the</strong> wrong size.<br />
24 Borrowed money from <strong>the</strong> bank to take advantage of <strong>the</strong> discount offered<br />
on <strong>the</strong> June 15 purchase. Signed a note payable to <strong>the</strong> bank for <strong>the</strong><br />
net amount.<br />
24 Paid supplier for goods purchased on June 15, less all discounts.<br />
28 Received cash in full settlement of <strong>the</strong> account from <strong>the</strong> customer who<br />
purchased inventory on June 18.<br />
29 Paid <strong>the</strong> amount owed on account from <strong>the</strong> purchase of June 3, less <strong>the</strong><br />
June 9 return.<br />
30 Purchased inventory for cash, $900, less a quantity discount of $35.<br />
Required<br />
1. Journalize <strong>the</strong> transactions above. Explanations are not required.<br />
2. Set up T-accounts <strong>and</strong> post <strong>the</strong> journal entries to show <strong>the</strong> ending balances in<br />
<strong>the</strong> Inventory <strong>and</strong> Cost of Goods Sold accounts.<br />
3. Assume that <strong>the</strong> note payable signed on June 24 requires <strong>the</strong> payment of $95<br />
interest expense. Was <strong>the</strong> decision to borrow funds to take advantage of <strong>the</strong> cash<br />
discount wise or unwise?<br />
Solution to Review Problem<br />
Requirement 1<br />
Note: To save space, calculations have been included in <strong>the</strong> journal entries. Normally,<br />
<strong>the</strong>y would be included in <strong>the</strong> explanations <strong>and</strong> space would be left between each<br />
journal entry.<br />
June 3 Inventory ...................................................................... 1,610<br />
Accounts Payable .................................................. 1,610<br />
9 Accounts Payable ($1,610 × 0.40) ............................. 644<br />
Inventory .............................................................. 644<br />
12 Cash............................................................................... 920<br />
Sales Revenue......................................................... 920<br />
12 Cost of Goods Sold...................................................... 550<br />
Inventory ................................................................ 550<br />
15 Inventory ($5,100 – $100) ........................................... 5,000<br />
Accounts Payable ................................................. 5,000<br />
16 Inventory ..................................................................... 260<br />
Cash......................................................................... 260<br />
18 Accounts Receivable .................................................. 2,000<br />
Sales Revenue......................................................... 2,000<br />
18 Cost of Goods Sold...................................................... 1,180<br />
Inventory ................................................................ 1,180<br />
22 Sales Returns <strong>and</strong> Allowances .................................. 800<br />
Accounts Receivable ............................................. 800<br />
22 Inventory ...................................................................... 480<br />
Cost of Goods Sold................................................ 480<br />
24 Cash [$5,000 – 0.03($5,000)] ....................................... 4,850<br />
Note Payable .......................................................... 4,850<br />
24 Accounts Payable........................................................ 5,000<br />
Inventory ($5,000 × 0.03) ...................................... 150<br />
Cash ($5,000 × 0.97) .............................................. 4,850<br />
28 Cash [($2,000 – $800) × 0.98] ...................................... 1,176<br />
Sales Discounts [($2,000 – $800) × 0.02] ................... 24<br />
Accounts Receivable ($2,000 – $800)................... 1,200<br />
29 Accounts Payable ($1,610 – $644) ............................. 966<br />
Cash......................................................................... 966<br />
30 Inventory ($900 – $35) ................................................ 865<br />
Cash......................................................................... 865