Merchandising Operations and the Accounting Cycle - Pearson

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Solution to Review Problem Requirement 1 JAN KING DISTRIBUTING COMPANY LTD. Work Sheet For the Year Ended December 31, 2003 Trial Balance Adjustments Income Statement Balance Sheet Account Title Debit Credit Debit Credit Debit Credit Debit Credit Cash 5,670 5,670 Accounts receivable 37,100 37,100 Inventory 60,500 60,500 65,800 65,800 Supplies 3,930 (a) 2,580 1,350 Prepaid rent 6,000 (b) 5,000 1,000 Furniture 26,500 26,500 Accumulated amortization—furn. 21,200 (d)2,650 23,850 Accounts payable 46,340 46,340 Salary payable (e) 1,300 1,300 Interest payable (f) 600 600 Unearned sales revenue 3,500 (c) 1,100 2,400 Note payable, long-term 35,000 35,000 Common stock 10,000 10,000 Retained earnings 13,680 13,680 Dividends 48,000 48,000 Sales revenue 346,700 (c) 1,100 347,800 Sales discounts 10,300 10,300 Sales returns and allowances 8,200 8,200 Purchases 175,900 175,900 Purchase discounts 6,000 6,000 Purchase returns and allowances 7,430 7,430 Freight in 9,300 9,300 Amortization expense—furniture (d)2,650 2,650 Interest expense 2,900 (f) 600 3,500 Rent expense 7,000 (b) 5,000 12,000 Salary expense 82,750 (e) 1,300 84,050 Supplies expense (a) 2,580 2,580 Utilities expense 5,800 5,800 489,850 489,850 13,230 13,230 374,780 427,030 185,420 133,170 Net income 52,250 52,250 427,030 427,030 185,420 185,420 290 Part One The Basic Structure of Accounting 2. Journalize the adjusting and closing entries at December 31, 2003. Post to the Income Summary account as an accuracy check on the entries affecting that account. The credit balance closed out of Income Summary should equal net income computed on the work sheet. 3. Prepare the company’s multi-step income statement, statement of retained earnings, and balance sheet in account format. Draw arrows connecting the statements, or state how the statements are linked. 4. Compute the inventory turnover for 2003. Turnover for 2002 was 2.1 times. Would you expect Jan King Distributing Company Ltd. to be more or less profitable in 2003 than in 2002? Give your reason.
Requirement 2 Adjusting Entries 2003 Dec. 31 Supplies expense.................................................... 2,580 Supplies.............................................................. 2,580 Dec. 31 Rent expense........................................................... 5,000 Prepaid rent ....................................................... 5,000 Dec. 31 Unearned sales revenue ($3,500 – $2,400).......... 1,100 Sales revenue—furn. ........................................ 1,100 Dec. 31 Amortization expense ($26,500/10)................... 2,650 Accumulated amortization—furniture ......... 2,650 Dec. 31 Salary expense........................................................ 1,300 Salary payable ................................................... 1,300 Dec. 31 Interest expense ..................................................... 600 Interest payable................................................. 600 Closing Entries 2003 Dec. 31 Sales revenue ...................................................... 347,800 Income summary.......................................... 347,800 Dec. 31 Cost of goods sold ............................................. 245,700 Inventory (beginning balance) ................... 60,500 Purchases ....................................................... 175,900 Freight in........................................................ 9,300 Dec. 31 Inventory (ending balance) .............................. 65,800 Purchase discounts ............................................ 6,000 Purchase returns and allowances .................... 7,430 Cost of goods sold ........................................ 79,230 Dec. 31 Income summary ............................................... 295,550 Sales discounts.............................................. 10,300 Sales returns and allowances...................... 8,200 Cost of goods sold ($245,700 – $79,230) .................................. 166,470 Salary expense............................................... 84,050 Rent expense ................................................. 12,000 Amortization expense—furniture.............. 2,650 Utilities expense............................................ 5,800 Supplies expense .......................................... 2,580 Interest expense ............................................ 3,500 Dec. 31 Income summary ($347,800 – $295,550) ......... 52,250 Retained earnings......................................... 52,250 Dec. 31 Retained earnings .............................................. 48,000 Dividends ...................................................... 48,000 Income Summary Clo. 295,550 Clo. 347,800 Clo. 52,250 Bal. 52,250 Chapter Five Merchandising Operations and the Accounting Cycle 291
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 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: Summary Problem for Your Review The
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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