Merchandising Operations and the Accounting Cycle - Pearson

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284 Part One The Basic Structure of Accounting AUSTIN SOUND CENTRE INC. Accounting Work Sheet For the Year Ended December 31, 2004 Trial Balance Adjustments Income Statement Balance Sheet Account Title Debit Credit Debit Credit Debit Credit Debit Credit Cash 2,850 2,850 Accounts receivable 4,600 4,600 Note receivable, current 8,000 8,000 Interest receivable (a) 400 400 Inventory 38,600 38,600 40,200 40,200 Supplies 650 (b) 550 100 Prepaid insurance 1,200 (c) 1,000 200 Furniture 33,200 33,200 Accumulated amortization—furn. 2,400 (d) 600 3,000 Accounts payable 47,000 47,000 Unearned sales revenue 2,000 (e) 1,300 700 Wages payable (f) 400 400 Interest payable (g) 200 200 Note payable, long-term 12,600 12,600 Common stock 10,000 10,000 Retained earnings 15,900 15,900 Dividends 54,100 54,100 Sales revenue 168,000 (e) 1,300 169,300 Sales discounts 1,400 1,400 Sales returns and allowances 2,000 2,000 Interest revenue 600 (a) 400 1,000 Purchases 91,400 91,400 Purchase discounts 3,000 3,000 Purchase returns and allowances 1,200 1,200 Freight in 5,200 5,200 Amortization expense—furniture (d) 600 600 Insurance expense (c) 1,000 1,000 Interest expense 1,300 (g) 200 1,500 Rent expense 8,400 8,400 Supplies expense (b) 550 550 Wages expense 9,800 (f) 400 10,200 262,700 262,700 4,450 4,450 160,850 214,700 143,650 89,800 Net income 53,850 53,850 214,700 214,700 143,650 143,650 EXHIBIT 5S-5 Work Sheet OBJECTIVE S5 Prepare a merchandiser’s financial statements under the periodic inventory system Balance Sheet Columns The only new item on the balance sheet is inventory. The balance listed is the ending amount of $40,200, which is determined by a physical count of inventory on hand at the end of the period. Preparing the Financial Statements of a Merchandiser Exhibit 5S-6 presents Austin Sound’s financial statements. The income statement through gross margin repeats Exhibit 5S-3. This information is followed by the operating expenses, expenses other than cost of goods sold that are incurred in the entity’s major line of business—merchandising. Wages expense is Austin Sound’s cost of employing workers. Rent is the cost of obtaining store space. Insurance helps to protect the inventory. Store furniture wears out; the expense is amortization. Supplies expense is the cost of stationery, mailing, and the like, used in operations.
Assets Current assets: Cash ...................................... $ 2,850 Accounts receivable............ 4,600 Note receivable ................... 8,000 Interest receivable............... 400 Inventory ............................. 40,200 Prepaid insurance............... 200 Supplies................................ 100 Total current assets ......... 56,350 Capital assets: Furniture and fixtures........ $33,200 Less: Accumulated amortization ................. 3,000 30,200 Total assets .............................. $86,550 AUSTIN SOUND CENTRE INC. Income Statement For the Year Ended December 31, 2004 Sales revenue ........................................................... $169,300) Less: Sales discounts........................................... $ 1,400 Sales returns and allowances ................. 2,000 3,400) Net sales revenue ............................................... $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) Operating expenses: Wages expense .................................................... 10,200) Rent expense........................................................ 8,400) Insurance expense ............................................ 1,000) Amortization expense—furniture ............... 600) Supplies expense ............................................ 550) 20,750) Income from operations ......................................... 54,350) Other revenue and (expense): Interest revenue................................................... 1,000) Interest expense ................................................. (1,500) (500) Net income ................................................................ $ 53,850) AUSTIN SOUND CENTRE INC. Statement of Retained Earnings For the Year Ended December 31, 2004 Retained earnings, January 1, 2004 ..................................................................................... $15,900 Add: Net income.................................................................................................................... 53,850 69,750 Less: Dividends...................................................................................................................... 54,100 Retained earnings, December 31, 2004 ............................................................................... $15,650 AUSTIN SOUND CENTRE INC. Balance Sheet December 31, 2004 Liabilities Current liabilities: Accounts payable ......................... $47,000 Unearned sales revenue .............. 700 Wages payable .............................. 400 Interest payable............................. 200 Total current liabilities ............ 48,300 Long-term liability: Note payable ................................ 12,600 Total liabilities ................................... 60,900 Shareholders’ Equity Common stock ................................... 10,000 Retained earnings .............................. 15,650 Total shareholders’ equity....... 25,650 Total liabilities and shareholders’ equity..................... $86,550 EXHIBIT 5S-6 Financial Statements of Austin Sound Centre Inc. Chapter Five Merchandising Operations and the Accounting Cycle 285
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 and 60: Supplement to Chapter 5 Accounting
Page 61 and 62: Panel A Panel B Beginning inventory
Page 63: AUSTIN SOUND CENTRE INC. Trial Bala
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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