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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Sales discounts..................................................................... 550<br />
Sales returns <strong>and</strong> allowances............................................. 3,800<br />
Sales revenues...................................................................... 69,000<br />
Supplies ................................................................................ 1,900<br />
Unearned sales revenue ..................................................... 1,000<br />
Note: For simplicity, all operating expenses have been summarized in <strong>the</strong> account<br />
Operating Expenses.<br />
Additional data at July 31, 2003:<br />
a. A physical count of items showed $200 of supplies on h<strong>and</strong>.<br />
b. An inventory count showed inventory on h<strong>and</strong> at July 31, 2003, $9,850.<br />
c. The equipment has an estimated useful life of eight years <strong>and</strong> is expected to<br />
have no value at <strong>the</strong> end of its life.<br />
d. Unearned sales revenues of $350 were earned by July 31, 2003.<br />
Required<br />
1. Record all adjustments <strong>and</strong> closing entries that would be required on July 31,<br />
2003.<br />
2. Prepare <strong>the</strong> financial statements of Rapid Kayaks Ltd. for <strong>the</strong> year ended July 31,<br />
2003.<br />
Problems (Group B)<br />
Problem 5-1B Explaining <strong>the</strong> perpetual inventory system (Obj. 2)<br />
Claire Vision Ltd. is a regional chain of optical shops in Manitoba. The company<br />
offers a large selection of eyeglass frames, <strong>and</strong> Claire Vision Ltd. stores provide<br />
while-you-wait service. Claire Vision Ltd. has launched a vigourous advertising<br />
campaign promoting its two-for-<strong>the</strong>-price-of-one frame sale.<br />
Required<br />
Claire Vision Ltd. expects to grow rapidly <strong>and</strong> increase its level of inventory. As<br />
chief accountant of <strong>the</strong> company, you wish to install a perpetual inventory system.<br />
Write a memo to <strong>the</strong> company president to explain how <strong>the</strong> system would work.<br />
Use <strong>the</strong> following heading for your memo:<br />
Date: _____________________<br />
To: Company President<br />
From: Chief Accountant<br />
Subject: How a perpetual inventory system works<br />
Problem 5-2B <strong>Accounting</strong> for <strong>the</strong> purchase <strong>and</strong> sale of inventory under <strong>the</strong> perpetual inventory<br />
system (Obj. 2)<br />
The following transactions occurred between Shoppers Drug Mart <strong>and</strong> Johnson &<br />
Johnson Inc. during June of <strong>the</strong> current year.<br />
June 8 Johnson & Johnson sold $9,800 worth of merch<strong>and</strong>ise to Shoppers Drug Mart<br />
on terms of 2/10 n/30, FOB shipping point. These goods cost Johnson & Johnson<br />
$4,200. Johnson & Johnson prepaid freight charges of $200 <strong>and</strong> included this<br />
amount in <strong>the</strong> invoice total. (Johnson & Johnson’s entry to record <strong>the</strong> freight<br />
payment debits Accounts Receivable <strong>and</strong> credits Cash.)<br />
11 Shoppers Drug Mart returned $1,200 of <strong>the</strong> merch<strong>and</strong>ise purchased on June 8.<br />
Chapter Five <strong>Merch<strong>and</strong>ising</strong> <strong>Operations</strong> <strong>and</strong> <strong>the</strong> <strong>Accounting</strong> <strong>Cycle</strong> 269