Merchandising Operations and the Accounting Cycle - Pearson

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