Chapter 05 – Accounting for Retail Businesses
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Page 101
Rent revenue
17,500
Total revenues
$383,000
Expenses:
Cost of goods sold
$121,700
Selling expenses
41,500
Administrative expenses
56,500
Interest expense
12,000
Total expenses
231,700
Net income
$151,300
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
220. The following data were extracted from the accounting records of Dana Designs for the year ended March 31.
Inventory, April 1
Inventory, March 31
Purchases
Purchase returns and allowances
Purchase discounts
Sales
Freight in
Prepare the gross profit and cost of goods sold section of the income statement for the year ended March 31, using the
periodic method.
ANSWER:
Dana Designs
Income Statement
For the Year Ended March 31
Sales
$770,000
Cost of goods sold:
Inventory, April 1
$530,000
Cost of merchandise purchased:
Purchases
$270,000
Purchases returns and allowances
(25,000)
Purchase discounts
(10,000)
Net purchases
$235,000
Freight in
3,000
Total cost of merchandise purchased
238,000
Inventory available for sale
$768,000
Inventory, March 31
375,000
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
DATE MODIFIED:
10/16/2017 4:50 PM
222. Selected data from the ledger of Beck Co., after adjustments, on September 30, the end of the fiscal year, are listed as
follows:
Accounts Receivable
$ 39,120
Prepaid Insurance
$ 4,680
Accumulated Depreciation
60,540
Note Payable
77,750
Administrative Expenses
90,000
Retained Earnings
25,000
Common Stock
65,000
Salaries Payable
3,060
Cost of Goods Sold
550,000
Sales
950,000
Dividends
65,000
Selling Expenses
102,000
Interest Revenue
10,000
Supplies
3,125
Office Equipment
82,700
Prepare a single-step income statement and a statement of stockholders’ equity. No stock was issued during the year.
ANSWER:
Beck Co.
Income Statement
For the Year Ended September 30
Revenues:
Sales
$950,000
Interest revenue
10,000
Total revenues
$960,000
Expenses:
Cost of goods sold
$550,000
Selling expenses
102,000
Administrative expenses
90,000
Total expenses
742,000
Net income
$218,000
Beck Co.
Statement of Stockholders’ Equity
For the Year Ended September 30
Common
Stock
Retained
Earnings
Total
Balances, January 1
$65,000
$ 25,000
$90,
Net income
$218,000
$218,
Dividends
(65,000)
(65
Balances, December 31
$65,000
$178,000
$243,
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
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Page 104
223. The following data for the current year ended June 30 are from the accounting records of Zanadu Co.:
Administrative expenses
$ 28,750
Cost of goods sold
181,440
Interest expense
3,600
Rent revenue
1,500
Sales
534,440
Selling expenses
65,000
Prepare a multiple-step income statement for the year ended June 30.
ANSWER:
Zanadu Co.
Income Statement
For the Year Ended June 30
Sales
$534,440
Cost of goods sold
181,440
Gross profit
$353,000
Operating expenses:
Selling expenses
65,000
Administrative expenses
28,750
Total operating expenses
93,750
Operating income
$259,250
Other revenue and expense:
Rent revenue
1,500
Interest expense
(3,600)
Net income
$257,150
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
224. Madison Company’s perpetual inventory records indicate that $875,300 of merchandise should be on hand on
October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the
inventory shrinkage for Madison Company for the year ended October 31.
ANSWER:
Oct. 31
Cost of Goods Sold
93,400
Inventory
93,400
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.07 – Adjusting Entries
Chapter 05 – Accounting for Retail Businesses
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Page 107
a.
Sales: $975,000; Operating expenses: $230,000
b.
Sales: $975,000; Operating expenses: $115,000
c.
Sales: $860,000; Operating expenses: $230,000
d.
Sales: $860,000; Operating expenses: $115,000
ANSWER:
b
RATIONALE:
Arch
Company
Net income
$315,000
Sales
975,000
Gross profit
430,000
Operating
expenses
115,000
Cost of goods
sold
545,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–01 – LO: 05–01
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/30/2017 8:27 PM
DATE MODIFIED:
10/16/2017 4:50 PM
229. What are the correct amounts missing from the condensed income statement of Batavia, Inc.?
Batavia, Inc.
Net income
$ ?
Sales
865,000
Gross profit
?
Operating expenses
125,000
Cost of goods sold
320,000
a.
Net income: $545,000; Gross profit: $740,000
b.
Net income: $545,000; Gross profit: $545,000
c.
Net income: $420,000; Gross profit: $740,000
d.
Net income: $420,000; Gross profit: $545,000
ANSWER:
d
RATIONALE:
Batavia,
Inc.
Net income
$420
Sales
865
Gross profit
545
Chapter 05 – Accounting for Retail Businesses
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Page 110
Inv. No.
Merchandise
Freight Paid by Seller
Freight Terms
Returns and Allowances
22384
$4,500
$140
FOB Shipping Point,
2/10, net 30
$1,200
a.
$3,374
b.
$3,234
c.
$3,440
d.
$4,640
ANSWER:
a
RATIONALE:
($4,500 – $1,200) – [($4,500 – $1,200) × 2%)] + $140 = $3,374
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–02 – LO: 05–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/30/2017 9:38 PM
DATE MODIFIED:
10/16/2017 4:50 PM
234. What amount will be paid in full settlement of Invoice 22392, assuming that credit for returns and allowances was
received prior to payment and that the invoice was paid within the discount period.
Inv. No.
Merchandise
Freight Paid by Seller
Freight Terms
Returns and Allowances
22392
$7,650
$120
FOB Shipping Point,
1/10, net 45
$450
a.
$7,694
b.
$7,574
c.
$7,530
d.
$7,128
ANSWER:
d
RATIONALE:
($7,650 – $450) – [($7,650 – $450) × 1%)] = $7,128
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–02 – LO: 05–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG – Analytic
DATE CREATED:
9/30/2017 9:54 PM
DATE MODIFIED:
10/16/2017 4:50 PM