Merchandising Operations and the Accounting Cycle - Pearson

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294 Part One The Basic Structure of Accounting Invoice date: May 14, 2003 Sold to: Kendrick Tire Ltd. 4219 Cumberland Avenue Saskatoon, SK S7M 1X3 Quantity Ordered 6 8 14 Required Record the required transactions in the journal of Mavis Jewellers Ltd. Explanations are not required. Exercise 5S-4 Journalizing sale transactions under the periodic inventory system (Obj. S2) Refer to the business situation in Exercise 5S-3. Journalize the transactions of La Roche Fine Gems Ltd. Explanations are not required. Note: Exercise 5-14 (page 261), 5-15 (page 261), and 5-16 (page 261) also pertain to the periodic inventory system. Supplement Problems ABC TIRE WHOLESALE DISTRIBUTORS 2600 Victoria Avenue Regina, Saskatchewan S4P 1B3 Payment terms: 2/10 n/30 Description Quantity Shipped Price Amount P135-X4 Radials......... L912 Belted-bias........ R39 Truck tires......... Problem 5S-1 Accounting for the purchase and sale of inventory under the periodic system (Obj. S2) The following transactions occurred between Merck Frosst Canada Inc. and Drug Trading Co. during February of the current year. Feb. 6 Merck Frosst sold $12,600 worth of merchandise to Drug Trading on terms of 2/10 n/30, FOB shipping point. Merck Frosst prepaid freight charges of $500 and included this amount in the invoice total. (Merck Frosst’s entry to record the freight payment debits Accounts Receivable and credits Cash.) 10 Drug Trading returned $1,800 of the merchandise purchased on February 6. Merck Frosst issued a credit memo for this amount. 15 Drug Trading paid $6,000 of the invoice amount owed to Merck Frosst for the February 6 purchase. This payment included none of the freight charge. 27 Drug Trading paid the remaining amount owed to Merck Frosst for the February 6 purchase. 6 8 10 $55.71 61.98 75.03 $334.26 495.84 750.30 Total...........................................$1,580.40 Due date: May 24, 2003 May 25 through June 13, 2003 Paid: Amount: $1,548.79 $1,580.40
Required Journalize these transactions, first on the books of Drug Trading Co. and second on the books of Merck Frosst Canada Inc. Problem 5S-2 Journalizing purchase and sale transactions under the periodic inventory system (Obj. S2) Salimi Distributing Company Inc. engaged in the following transactions during May of the current year: May 3 Purchased office supplies for cash, $900. 7 Purchased inventory on credit terms of 3/10 net eom, $6,000. 8 Returned half the inventory purchased on May 7. It was not the inventory ordered. 10 Sold goods for cash, $1,350. 13 Sold inventory on credit terms of 2/15 n/45 for $11,700, less $1,800 quantity discount offered to customers who purchased in large quantities. 16 Paid the amount owed on account from the purchase of May 7, less the discount and the return. 17 Received wrong-sized inventory returned from May 13 sale, $2,700, which is the net amount after the quantity discount. 18 Purchased inventory of $12,000 on account. Payment terms were 2/10 net 30. 26 Borrowed $11,760 from the bank to take advantage of the discount offered on the May 18 purchase. Signed a note payable to the bank for this amount. 26 Paid supplier for goods purchased on May 18, less the discount. 28 Received cash in full settlement of the account from the customer who purchased inventory on May 13, less the discount and the return. 29 Purchased inventory for cash, $6,000, less a quantity discount of $1,200, plus freight charges of $480. Required 1. Journalize the preceding transactions on the books of Salimi Distributing Company Inc. 2. The note payable signed on May 26 requires Salimi to pay $90 interest expense. Was the decision to borrow funds to take advantage of the cash discount wise or unwise? Support your answer by comparing the discount to the interest paid. Problem 5S-3 Journalizing purchase and sale transactions under the periodic inventory system (Obj. S2) 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. 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. 16 Paid the electricity bill, $400. 20 Received returned inventory from the July 14 sale, $600 (net amount after the quantity discount). Segal shipped the wrong goods by mistake. 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. Chapter Five Merchandising Operations and the Accounting Cycle 295
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
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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 and 70: Summary Problem for Your Review The
Page 71 and 72: Requirement 2 Adjusting Entries 200
Page 73: Requirement 4 Inventory Cost of goo
Page 77: BLISS SALES COMPANY LTD. Trial Bala
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