Chapter 05 – Accounting for Retail Businesses
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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:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
179. Complete the following data taken from the condensed income statements for merchandising Companies X, Y, and
Z.
Company X
Company Y
Company Z
Net income/(net loss)
$220
$ ?
$( 70)
Sales
?
1,315
890
Gross profit
435
?
465
Operating expenses
?
565
?
Cost of goods sold
330
775
?
ANSWER:
Company Y
Net income/(net loss)
$ (25)
Sales
1,315
Gross profit
540
Operating expenses
565
Cost of goods sold
775
OR Rearranged in the order of the income statement:
Company X
Company Y
Company Z
Sales
$765
$1,315
$890
Cost of goods sold
330
775
425
Gross profit
435
540
465
Operating expenses
215
565
535
Net income/(net loss)
220
(25)
(70)
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Challenging
QUESTION TYPE:
Subjective Short Answer
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:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
180. During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the goods sold
is $322,325. What is the amount of the gross profit?
ANSWER:
$137,500 + $425,600 – $322,325 = $240,775
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Chapter 05 – Accounting for Retail Businesses
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Page 73
ANSWER:
Inventory
5,586
Accounts Payable
5,586
Accounts Payable
5,586
Cash
5,586
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
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:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
184. On March 25, Osgood Company sold merchandise on account, $10,000, terms n/30. The applicable sales tax
percentage is 7.5%. Record the transaction.
Journal
Date
Description
Post.
Ref.
Debit
Credit
ANSWER:
Journal
Date
Description
Post.
Ref.
Debit
Credit
Mar. 25
Accounts Receivable
10,750
Sales
10,000
Sales Tax Payable
750
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–02 – LO: 05–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
185. Journalize the following merchandise transactions. The company uses the perpetual inventory system.
(a)
Sold merchandise on account, $17,300, with terms 2/10, net 30. The cost of the goods
Chapter 05 – Accounting for Retail Businesses
DATE MODIFIED:
10/16/2017 4:50 PM
sold was $12,600.
(b)
Received payment within the discount period.
ANSWER:
(a)
Accounts Receivable
16,954
Sales
16,954
Cost of Goods Sold
12,600
Inventory
12,600
(b)
Cash
16,954
Accounts Receivable
16,954
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–02 – LO: 05–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
186. Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances
was received prior to payment and that all invoices were paid within the discount period.
Merchandise
Freight Paid by
Seller
Freight Terms
Returns and
Allowances
(a)
$4,500
$140
FOB Shipping
Point, 2/10, net 30
$1,200
(b)
$7,650
$200
FOB Destination,
1/10, net 45
$450
ANSWER:
(a) $3,374
($4,500 – $1,200) – [($4,500 – $1,200) × 2%)] + $140 = $3,374
(b) $7,128
($7,650 – $450) – [($7,650 – $450) × 1%)] = $7,128
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
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:
7/22/2017 6:19 PM
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Page 75
187. Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the goods sold is
$38,500. The Batson Co. paid the invoice within the discount period. Prepare the entries that both Sampson and Batson
Companies would record for the above. Assume both Sampson and Batson use a perpetual inventory system.
ANSWER:
Sampson Company Journal Entries:
Accounts Receivable—Batson Co.
45,080
Sales
45,080
Cost of Goods Sold
38,500
Inventory
38,500
Cash
45,080
Accounts Receivable—Batson Co.
45,080
Batson Company Journal Entries:
Inventory
45,080
Accounts Payable—Sampson Co.
45,080
Accounts Payable—Sampson Co.
45,080
Cash
45,080
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
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:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
188. Which of the following costs would be included in inventory?
(a)
Purchase price
(b)
Insurance in transit FOB shipping point
(c)
Freight for delivery FOB shipping point
(d)
Repair due to negligence of receiving clerk
(e)
Receiving department employee salary
(f)
Cost of processing purchase orders
ANSWER:
(a), (b), and (c)
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Subjective Short Answer
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