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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EXHIBIT 5-6<br />
Work Sheet<br />
240 Part One The Basic Structure of <strong>Accounting</strong><br />
AUSTIN SOUND CENTRE INC.<br />
<strong>Accounting</strong> Work Sheet<br />
For <strong>the</strong> Year Ended December 31, 2004<br />
Trial Balance Adjustments Income Statement Balance Sheet<br />
Account Title Debit Credit Debit Credit Debit Credit Debit Credit<br />
Cash 2,850 2,850<br />
Accounts receivable 4,600 4,600<br />
Note receivable, current 8,000 8,000<br />
Interest receivable (a) 400 400<br />
Inventory 40,500 (b) 300 40,200<br />
Supplies 650 (c) 550 100<br />
Prepaid insurance 1,200 (d)1,000 200<br />
Furniture 33,200 33,200<br />
Accumulated amortization—furn. 2,400 (e) 600 3,000<br />
Accounts payable 47,000 47,000<br />
Unearned sales revenue 2,000 (f) 1,300 700<br />
Wages payable (g) 400 400<br />
Interest payable (h) 200 200<br />
Note payable, long-term 12,600 12,600<br />
Common stock 10,000 10,000<br />
Retained earnings 15,900 15,900<br />
Dividends 54,100 54,100<br />
Sales revenue 168,000 (f) 1,300 169,300<br />
Sales discounts 1,400 1,400<br />
Sales returns <strong>and</strong> allowances 2,000 2,000<br />
Interest revenue 600 (a) 400 1,000<br />
Cost of goods sold 90,500 (b) 300 90,800<br />
Amortization expense—furniture (e) 600 600<br />
Insurance expense (d)1,000 1,000<br />
Interest expense 1,300 (h) 200 1,500<br />
Rent expense 8,400 8,400<br />
Supplies expense (c) 550 550<br />
Wages expense 9,800 (g) 400 10,200<br />
258,500 258,500 4,750 4,750 116,450 170,300 143,650 89,800<br />
Net income 53,850 53,850<br />
170,300 170,300 143,650 143,650<br />
OBJECTIVE 4<br />
Prepare a merch<strong>and</strong>iser’s financial<br />
statements under <strong>the</strong> perpetual<br />
inventory system<br />
Preparing <strong>the</strong> Financial Statements<br />
of a Merch<strong>and</strong>iser<br />
Exhibit 5-7 presents Austin Sound Centre Inc.’s financial statements.<br />
To solidify your underst<strong>and</strong>ing of how <strong>the</strong> financial statements are prepared,<br />
you should trace <strong>the</strong> amounts in <strong>the</strong> work sheet (Exhibit 5-6) to <strong>the</strong> financial statements<br />
in Exhibit 5-7.<br />
Income Statement The income statement reports operating expenses, which<br />
are those expenses o<strong>the</strong>r than cost of goods sold incurred in <strong>the</strong> entity’s major line<br />
of business—merch<strong>and</strong>ising. Austin Sound’s operating expenses include wages<br />
expense, rent, insurance, amortization of furniture, <strong>and</strong> supplies expense. In Exhibit<br />
5-1, The Forzani Group Ltd.’s total operating expenses are $117,836,000 for <strong>the</strong> year<br />
ended January 30, 2000.<br />
Many companies report <strong>the</strong>ir operating expenses in two categories: