Merchandising Operations and the Accounting Cycle - Pearson

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JVC SALES ORDER NO. N O DE COMMANDE CUSTOMER ORDER NO. N O DE COMMANDE CLIENT SPECIAL INSTRUCTIONS INSTRUCTIONS SPÉCIALES QTY.ORDERED QTÉ COMMANDÉE TRANS CODE CODE TRANS 10 1 SALESMAN NO. N O DU VENDEUR PST NO. TVP N O MODEL / PART NUMBER MODÈLE N O / NUMÉRO DE L'ARTICLE CASH DISCOUNT ESCOMPTE AU COMPTANT JVC CANADA INC. 21 FINCHDENE SQUARE, SCARBOROUGH, ONTARIO M1X 1A7 PHONE: (416) 293-1311 FAX: (416) 293-8208 DATE SHIPPED DATE D'EXPEDITION DESCRIPTION IF PAID BY SI PAYÉ PAR WAREHOUSE ENTREPÔT GST REG. NO. TPS REG. NO INVOICE / FACTURE DEPT. NO. N O DU DEPT. 21.21 26/06/02 NOTE: NO RETURNS WILL BE ACCEPTED WITHOUT PRIOR WRITTEN AUTHORIZATION BY JVC. ALL OVERDUE ACCOUNTS ARE SUBJECT TO 1-1/2% INTEREST CHARGE PER MONTH. CLAIMS FOR DAMAGES AND/OR SHORTAGES MUST BE MADE IN WRITING DIRECTLY WITH JVC. NOTE: AUCUN RETOUR ACCEPTÉ SANS AUTORISATION ÉCRITE PRÉALABLE PAR JVC. TOUT COMPTE EN SOUFFRANCE EST PASSIBLE D'UN INTÉRET DE 1-1/2% PAR MOIS. LES RÉCLAMATIONS EN RAISON DE DOMMAGES ET (OU) D'INSUFFISANCE DOIVENT ÉTRE ADRESSÉES EN ÉCRIVANT DIRECTEMENT AUPRÈS DE JVC. SHIPPED VIA EXPÉDIER PAR QTY. SHIPPED QTÉ EXPÉDIÉE CUSTOMER COPY COPIE DU CLIENT CUSTOMER NO. N O DU CLIENT PAYMENT TERMS CONDITIONS DE PAIEMENT QTY. B/O QTÉ VEN. UNIT PRICE PRIX UNITAIRE SHIPPING CHARGES / FRAIS D'EXPÉDITION OTHER CHARGES / AUTRES FRAIS GST / TPS GST / TPS ITC PST / TVP INVOICE DATE DATE DE FACTURE DISCOUNT ESCOMPTE G.S.T. REGISTRATION NO. R102746971 4 INVOICE NO. N O FACTURE 40191-00 B 205 27/05/02 MAIN 2501 27/05/02 4104798-A 2 INVOICE TO: FACTURE À: AUSTIN SOUND CENTRE INC. 299 PRINCESS ST. 3 KINGSTON, ON SHIP TO: EXPÉDIER À: AUSTIN SOUND CENTRE INC. 299 PRINCESS ST. 3 KINGSTON, ON K7L 1B4 K7L 1B4 10542 R105794761 3% 15, NET 30 DAYS FREIGHT EXPENSE FRAIS DE TRANSPORT 003 NIL 5 1 LA100 1 QLA200 CD PLAYER CD PLAYER 6 1 0 0 1 70.00 7 0 1 LL1 CD PLAYER 1 0 131.75 0 3 QLL2 CD PLAYER 3 0 153.00 0 1 KDV33J CASSETTE DECK 0 1 2 K2U40J CASSETTE DECK 0 2 2 SKS11 SPEAKER 0 2 9 Exhibit 5S-1 An Invoice OBJECTIVE 3 Compute the cost of goods sold under the periodic inventory system 280 Part One The Basic Structure of Accounting EXTENSION SOMME GLOBALE 70.00 131.75 459.00 660.75 0 0 46.25 0 0 707.00 Recording Transportation Costs Under the periodic system, costs to transport purchased inventory from seller to buyer are debited to a separate expense account, as shown for payment of a $60 freight bill: June 1 Freight In ................................................................... 60.00 Cash....................................................................... 60.00 Paid a freight bill. Recording the Sale of Inventory Recording sales is streamlined in the periodic system. With no running record of inventory to maintain, we can record a $3,000 sale as follows: June 5 Accounts Receivable ................................................ 3,000 Sales Revenue ...................................................... 3,000 Sale on account. No accompanying entry to Inventory and Cost of Goods Sold is required. Also, sales discounts and sales returns and allowances are recorded as shown for the perpetual system on page 233, but with no entry to Inventory and Cost of Goods Sold. Cost of Goods Sold Cost of goods sold (also called cost of sales) is the largest single expense of most businesses that sell merchandise, such as SportChek and Austin Sound. It is the cost of the inventory that the business has sold to customers. In a periodic system, cost of goods sold must be computed as in Exhibit 5S-2 and is not a ledger account. 8 1 The seller. 2 The invoice date, needed for determining whether the purchaser gets a discount for prompt payment (see 4). 3 The purchaser. This inventory is invoiced (billed) and shipped to the same address. 4 Credit terms of the transaction: If it pays within 15 days of the invoice date, Austin Sound may deduct 3% of the total amount. Otherwise, the full amount—net—is due in 30 days. 5 Austin ordered 6 CD players, 3 cassette decks, and 2 speakers. 6 JVC shipped 5 CD players, no cassette decks, and no speakers. 7 Quantity discount offered by JVC. 8 Total invoice amount. 9 Austin’s payment date. How much did Austin pay? (See 10.) 10 Payment occurred 14 days after the invoice date—within the discount period—so Austin paid $685.79 ($707 – 3% discount). We will disregard GST for now.
Panel A Panel B Beginning inventory + Net purchases + Freight in = Cost of goods available for sale – Ending inventory = Cost of goods sold Beginning Inventory Cost of Goods Available for Sale Ending Inventory Net Purchases and Freight In Cost of Goods Sold AUSTIN SOUND CENTRE INC. Income Statement For the Year Ended December 31, 2004 Purchases of inventory – Purchase discounts – Purchase returns and allowances = Net purchases It is the residual left when we subtract ending inventory from the cost of goods available for sale. Exhibit 5S-3 summarizes the first half of this Supplement by showing Austin Sound’s net sales revenue, cost of goods sold—including net purchases and freight in— and gross margin on the income statement for the periodic system. (All amounts are assumed.) PANEL A—Detailed Gross Margin Section—Often Required by Management Sales revenue ........................................................... $169,300 Less: Sales discounts........................................... $ 1,400 Sales returns and allowances ................. 2,000 3,400 Net sales .............................................................. $165,900) Cost of goods sold: Beginning inventory........................................... 38,600 Purchases ............................................................. 91,400 Less: Purchase discounts ................................. $3,000 Purchase returns and allowances ......... 1,200 4,200 Net purchases ................................................... 87,200 Freight in ........................................................... 5,200 Cost of goods available for sale ............................. 131,000 Less: Ending inventory.................................... 40,200 Cost of goods sold.................................................... 90,800 Gross margin............................................................. $ 75,100 PANEL B—Summary Gross Margin Section—Most Common in Annual Reports to Outsiders Net sales......................... $165,900 Cost of goods sold ........ 90,800 Gross margin................. $ 75,100 EXHIBIT 5S-2 Measuring Cost of Goods Sold in the Periodic Inventory System WORKING IT OUT Assume: Purchases ..................... $265,000 Sales............................. 463,000 Gross Margin................ 200,000 Purchase Returns and Allowances ....... 2,600 Beginning Inventory .................. 12,000 Sales Returns and Allowances ....... 4,500 Purchase Discounts ................. 2,400 Ending Inventory........... ? Sales Discounts............ 8,500 How much is Ending Inventory? A: $22,000. (Net sales: $463,000 – $4,500 – $8,500 = $450,000; Cost of goods sold: $450,000 – $200,000 = $250,000; Ending inventory: $12,000 + $265,000 – $2,600 – $2,400 – $250,000 = $22,000). EXHIBIT 5S-3 Partial Income Statement Chapter Five Merchandising Operations and the Accounting Cycle 281
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 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: Supplement to Chapter 5 Accounting
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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