Merchandising Operations and the Accounting Cycle - Pearson

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