Merchandising Operations and the Accounting Cycle - Pearson

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270 Part One The Basic Structure of Accounting Johnson & Johnson issued a credit memo for this amount and returned the goods, in excellent condition, to inventory (cost $500). June 17 Shoppers Drug Mart paid $4,000 of the invoice amount owed to Johnson & Johnson for the June 8 purchase. This payment included none of the freight charge. Shopper’s took the purchase discount on the partial payment. 26 Shoppers Drug Mart paid the remaining amount owed to Johnson & Johnson for the June 8 purchase. Required Journalize these transactions, first on the books of Shoppers Drug Mart, and second on the books of Johnson & Johnson. Problem 5-3B Journalizing purchase and sale transactions under the perpetual inventory system (Obj. 2) Segal Furniture Company Ltd. engaged in the following transactions during July of the current year: July 2 Purchased inventory for cash, $1,200, less a quantity discount of $225. 5 Purchased store supplies on credit terms of net eom, $675. 8 Purchased inventory of $4,500 less a quantity discount of 10%, plus freight charges of $230. Credit terms are 3/15 n/30. 9 Sold goods for cash, $1,800. Segal’s cost of these goods was $1,050. 11 Returned $300 (net amount after the quantity discount) of the inventory purchased on July 8. It was damaged in shipment. 12 Purchased inventory on credit terms of 3/10 n/30, $5,000. 14 Sold inventory on credit terms of 2/10 n/30, for $14,400, less a $900 quantity discount (cost, $7,500). 16 Received and paid the electricity and water bills, $400. 20 Received returned inventory from the July 14 sale, $600 (net amount after the quantity discount). Segal shipped the wrong goods by mistake. Segal’s cost of the inventory received was $375. 21 Borrowed the amount owed on the July 8 purchase. Signed a note payable to the bank for $3,867.50, which takes into account the return of inventory on July 11. 21 Paid supplier for goods purchased on July 8 less the discount and the return. 23 Received $10,290 cash in partial settlement of the account from the customer who purchased inventory on July 14. Granted the customer a 2% discount and credited his account receivable for $10,500. 30 Paid for the store supplies purchased on July 5. Required 1. Journalize the preceding transactions on the books of Segal Furniture Company Ltd. 2. Compute the amount of the receivable at July 31 from the customer to whom Segal sold inventory on July 14. What amount of cash discount applies to this receivable at July 31? Problem 5-4B Preparing a merchandiser’s work sheet under the perpetual inventory system (Obj. 3) Prairie Produce Company Ltd.’s trial balance on page 271 pertains to December 31, 2003. Additional data at December 31, 2003: a. Insurance expense for the year should total $12,180. b. Store fixtures have an estimated useful life of ten years and are expected to have no value when they are retired from service. c. Accrued salaries at December 31, $2,520. d. Accrued interest expense at December 31, $1,740.
e. Store supplies on hand at December 31, $1,520. f. Inventory based on the inventory count on December 31, $199,300. PRAIRIE PRODUCE COMPANY LTD. Trial Balance December 31, 2003 Cash..................................................................... $ 5,820 Accounts receivable.......................................... 13,120 Inventory............................................................ 203,520 Store supplies..................................................... 3,980 Prepaid insurance ............................................. 6,400 Store fixtures...................................................... 127,800 Accumulated amortization—store fixtures... $ 75,280 Accounts payable.............................................. 59,540 Salary payable ................................................... Interest payable ................................................. Note payable, long-term .................................. 74,400 Common stock................................................... 40,000 Retained earnings ............................................. 86,240 Dividends........................................................... 72,600 Sales revenue ..................................................... 572,740 Cost of goods sold............................................. 322,180 Amortization expense—store fixtures ........... Insurance expense............................................. 10,600 Interest expense................................................. 6,200 Rent expense...................................................... 29,260 Salary expense ................................................... 93,160 Store supplies expense ..................................... Utilities expense ................................................ 13,560 Total..................................................................... $908,200 $908,200 Required Complete Prairie Produce Company Ltd.’s work sheet for the year ended December 31, 2003. Key adjustments by letter. Problem 5-5B Journalizing the adjusting and closing entries of a merchandising business under the perpetual inventory system (Obj. 4) Refer to the data in Problem 5-4A. Required 1. Journalize the adjusting and closing entries of Prairie Produce Company Ltd. 2. Determine the December 31, 2003, balance in the Retained Earnings account. Problem 5-6B Preparing a multi-step income statement and a classified balance sheet under the perpetual inventory system (Obj. 3, 4) Link Back to Chapter 4 (Classified Balance Sheet) For simplicity, all operating expenses are summarized in the accounts Selling Expenses and General Expenses. Selected accounts of Saturna Home Entertainment Ltd., at July 31, 2003, are listed in alphabetical order on page 272. Required 1. Prepare the entity’s multi-step income statement for the month ended July 31, 2003. 2. Prepare Saturna’s classified balance sheet in report format at July 31, 2003. Show separately your computation of the July 31, 2003, balance of Retained Earnings. Chapter Five Merchandising Operations and the Accounting Cycle 271
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 and 38: Date: ___________________________ T
Page 39 and 40: 2. The R39 truck tires were ordered
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: Sales discounts....................
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

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