Merchandising Operations and the Accounting Cycle - Pearson

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258 Part One The Basic Structure of Accounting Journalize Liz Claiborne’s (a) sale, (b) cost of goods sold, and (c) cash receipt. How much gross margin did Liz Claiborne earn on this sale? Note: Exercise 5-2 covers the same situation for the buyer. Exercise 5-4 Journalizing purchase and sale transactions under the perpetual inventory system (Obj. 2) Journalize, without explanations, the following transactions of Pinetree Fashions Ltd. during the month of June 2004: June 3 Purchased $1,400 of inventory under terms of 2/10 n/eom and FOB shipping point. 7 Returned $600 of defective merchandise purchased on June 3. 9 Paid freight bill of $220 on June 3 purchase. 10 Sold inventory for $4,400, collecting cash of $800. Payment terms on the remainder were 2/15 n/30. The goods cost Pinetree Fashions Ltd. $2,600. 12 Paid amount owed on credit purchase of June 3, less the discount and the return. 16 Granted a sales allowance of $1,600 on the June 10 sale. 23 Received cash from June 10 customer in full settlement of her debt, less the allowance and the discount. Exercise 5-5 Journalizing transactions from a purchase invoice under the perpetual inventory system (Obj. 2) As the proprietor of Kendrick Tire Inc., you receive the invoice below from a supplier (GST has been disregarded). Required 1. Record the May 14 purchase on account. Invoice date: May 14, 2003 Sold to: Kendrick Tire Ltd. 4219 Cumberland Avenue Saskatoon, SK S7M 1X3 Quantity Ordered 6 8 14 ABC TIRE WHOLESALE DISTRIBUTORS 2600 Victoria Avenue Regina, Saskatchewan S4P 1B3 Payment terms: 2/10 n/30 Description Quantity Shipped Price Amount P135-X4 Radials......... L912 Belted-bias........ R39 Truck tires......... 6 8 10 $55.71 61.98 75.03 $334.26 495.84 750.30 Total...........................................$1,580.40 Due date: May 24, 2003 May 25 through June 13, 2003 Paid: Amount: $1,548.79 $1,580.40
2. The R39 truck tires were ordered by mistake and therefore were returned to ABC. Journalize the return on May 19. 3. Record the May 22 payment of the amount owed. Exercise 5-6 Journalizing purchase transactions under the perpetual inventory system (Obj. 2) On April 30, Mavis Jewellers Inc. purchased inventory of $7,500 on account from La Roche Fine Gems Ltd., a jewellery importer. Terms were 3/15 n/45. On receiving the goods Mavis checked the order and found $1,200 worth of items that were not ordered. Therefore, Mavis returned this amount of merchandise to La Roche on May 4. To pay the remaining amount owing on the invoice, Mavis had to borrow from the bank. On May 14 Mavis signed a short-term note payable to the bank and immediately paid La Roche Fine Gems Ltd. with the borrowed funds. On June 14, Mavis paid the bank the net amount of the invoice, which Mavis had borrowed, plus 1 percent interest monthly (round to the nearest dollar). Required Record the indicated transactions in the journal of Mavis Jewellers. Explanations are not required. Exercise 5-7 Journalizing sale transactions under the perpetual inventory system (Obj. 2) Refer to the business situation in Exercise 5-6. Journalize the transactions of La Roche Fine Gems Ltd. La Roche’s gross margin is 40 percent so cost of goods sold is 60 percent of sales. Explanations are not required. Exercise 5-8 Making closing entries under a perpetual inventory system (Obj. 3) An independent hardware store’s accounting records carried the following accounts at January 31, 2002: Accounts receivable....................... $ 6,520 Interest revenue.............................. 400 Accounts payable........................... 16,500 Other expense................................. 10,320 Cost of goods sold ......................... 223,700 Dividends........................................ 13,600 Selling expense............................... $ 55,680 Sales revenue .................................. 309,400 Interest expense.............................. 80 Merchandise inventories .............. 43,600 General and administrative expense ........................................ 5,380 Required Note: For simplicity, all operating expenses have been summarized in the accounts Selling Expense and General and Administrative Expenses. 1. Journalize all of this company’s closing entries at January 31, 2002. 2. Set up T-accounts for the Income Summary account and the Retained Earnings account. Post to these accounts and calculate their ending balances. One year earlier, at January 31, 2001, the Retained Earnings balance was $6,884. Exercise 5-9 Using work sheet data make the closing entries under the perpetual inventory system (Obj. 3) The trial balance and adjustments columns of the work sheet of First Choice Paint Centre Ltd. include the accounts and balances at March 31, 2003 (on page 260). Required Update the trial balance for the adjustments. Then journalize First Choice Paint Centre Ltd.’s closing entries at March 31, 2003. Chapter Five Merchandising Operations and the Accounting Cycle 259
Page 1 and 2: C H 5A P T E R Merchandising Operat
Page 3 and 4: Before launching into merchandising
Page 5 and 6: Suppose FGL’s Sports Experts stor
Page 7 and 8: debiting the Inventory account. A $
Page 9 and 10: Austin paid within the discount per
Page 11 and 12: STOP & THINK Refer to the Accounts
Page 13 and 14: STOP & THINK Why is there no Januar
Page 15 and 16: sales. Therefore the GST paid on pu
Page 17 and 18: Requirement 2 Inventory Cost of Goo
Page 19 and 20: Exhibit 5-5. All the new accounts
Page 21 and 22: EXHIBIT 5-7 Financial Statements of
Page 23 and 24: Journal Adjusting Entries a. Dec. 3
Page 25 and 26: Two Key Ratios for Decision Making
Page 27 and 28: Wal-Mart 1 2 3 4 5 6 Austin Sound C
Page 29 and 30: Decision Guidelines How do merchand
Page 31 and 32: 3. Prepare the company’s multi-st
Page 33 and 34: Requirement 3 JAN KING DISTRIBUTING
Page 35 and 36: c. Buying a large enough quantity o
Page 37: Date: ___________________________ T
Page 41 and 42: Required 1. Prepare the business’
Page 43 and 44: $7,700, $12,160, and $10,180 thousa
Page 45 and 46: 2. The note payable signed on May 2
Page 47 and 48: Trial Balance Adjustments Account T
Page 49 and 50: Sales discounts....................
Page 51 and 52: e. Store supplies on hand at Decemb
Page 53 and 54: Required 1. Inventory on hand at Se
Page 55 and 56: c. The equipment is expected to las
Page 57 and 58: HEIGHTS PHARMACY LTD. Balance Sheet
Page 59 and 60: Supplement to Chapter 5 Accounting
Page 61 and 62: Panel A Panel B Beginning inventory
Page 63 and 64: AUSTIN SOUND CENTRE INC. Trial Bala
Page 65 and 66: Assets Current assets: Cash .......
Page 67 and 68: Journal Adjusting Entries a. Dec. 3
Page 69 and 70: Summary Problem for Your Review The
Page 71 and 72: Requirement 2 Adjusting Entries 200
Page 73 and 74: Requirement 4 Inventory Cost of goo
Page 75 and 76: Required Journalize these transacti
Page 77: BLISS SALES COMPANY LTD. Trial Bala

Merchandising Operations and the Accounting Cycle - Pearson

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