Chapter 5 – Accounting for Merchandising Businesses
200. Calculate the gross profit for Jonas Company based on the following data:
Sales
$764,000
Selling expenses
52,500
Cost of goods sold
538,000
Sales, $764,000 – Cost of goods sold, $538,000 = Gross profit, $226,000
201. Which of the following accounts would be included in the chart of accounts of a merchandising company using the
(a) periodic inventory system, (b) perpetual inventory system, or (c) both systems?
(1) Purchases
(2) Inventory
(3) Sales
(4) Purchases Discounts
(5) Cost of Goods Sold
(6) Freight In
(7) Delivery Expense
(1) a (2) c (3) c (4) a (5) b (6) a (7) c
202. Using the letter preceding each account, arrange the following selected accounts in the order they would normally
appear in a chart of accounts of a company that uses a multiple-step income statement.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(b) (c) (a) (f) (h) (d) (g) (e)
Chapter 5 – Accounting for Merchandising Businesses
203. Journalize the following transactions assuming the perpetual inventory system:
July 3
Sold merchandise on account for $3,750 terms n/eom. The cost of the goods sold
was $2,000.
5
Issued credit memo for $1,050 for merchandise returned from sale on July 3.
The cost of the merchandise returned was $610.
12
Received check for the amount due for sale on July 3 less return on July 5.
17
Sold merchandise for $7,000 plus 6% sales tax to cash customers. The cost of the
goods sold was $3,830.
Date
Description
Debit
Credit
LEARNING OBJECTIVES:
Chapter 5 – Accounting for Merchandising Businesses
July 3
Accounts Receivable
Cost of Goods Sold
5
Customer Refunds Payable
5
Inventory
12
Cash
17
Cash
17
Cost of Goods Sold
LEARNING OBJECTIVES:
204. Using the following data taken from Hsu’s Imports Inc. which uses a periodic inventory system, determine the gross
profit to be reported on the income statement for the year ended March 31.
Inventory, April 1
$ 193,250
Inventory, March 31
180,100
Purchases
1,079,600
Purchases returns and allowances
51,200
Purchases discounts
18,500
Sales
1,860,000
Freight in
19,250
Chapter 5 – Accounting for Merchandising Businesses
**Cost of goods sold:
Inventory, April 1
$ 193,250
$1,009,900
Total cost of merchandise purchased
Inventory available for sale
Inventory, March 31
Cost of goods sold
$1,042,300
205. Using the following data taken from Hsu’s Imports Inc. which uses a periodic inventory system, prepare the cost of
goods sold section of the income statement for the year ended March 31.
Inventory, April 1
$ 193,250
Inventory, March 31
180,100
Purchases
1,079,600
Purchases returns and allowances
51,200
Purchases discounts
18,500
Sales
1,860,000
Freight in
19,250
Cost of goods sold:
Inventory, April 1
Inventory available for sale
Cost of goods sold
Chapter 5 – Accounting for Merchandising Businesses
206. Using the following data taken from Payton Inc. which uses a periodic inventory system, prepare the cost of goods
sold section of the income statement for the year ended May 31.
Inventory, June 1
$ 393,250
Inventory, May 31
380,100
Purchases
1,579,600
Purchases returns and allowances
81,200
Purchases discounts
16,500
Sales
2,060,000
Freight in
59,250
Cost of goods sold:
Inventory, June 1
$393,250
$1,481,900
Inventory available for sale
Inventory, May 31
Cost of goods sold
207. Using the following data taken from Payton Inc., which uses a periodic inventory system, determine the gross profit
to be reported on the income statement for the year ended May 31.
Inventory, June 1
$ 393,250
Inventory, May 31
380,100
Purchases
1,579,600
Purchases returns and allowances
81,200
Purchases discounts
16,500
Sales
2,060,000
Freight in
59,250
Chapter 5 – Accounting for Merchandising Businesses
Purchases discounts
$1,481,900
Cost of goods sold
$1,554,300
208. Prepare a single-step income statement from the following data for Burt Co., taken from the ledger after adjustments
on December 31, the end of the fiscal year.
Accounts Payable
$ 97,200
Accounts Receivable
64,300
Accumulated Depreciation—Office Equipment
72,750
Accumulated Depreciation—Store Equipment
162,100
Administrative Expenses
56,500
Common Stock
81,750
Cash
53,000
Cost of Goods Sold
121,700
Dividends
52,000
Interest Expense
12,000
Inventory
93,250
Note Payable, Due in two years
154,000
Office Equipment
149,750
Prepaid Insurance
6,500
Rent Revenue
17,500
Salaries Payable
28,700
Sales
365,500
Selling Expenses
41,500
Store Equipment
325,000
Supplies
4,000
Chapter 5 – Accounting for Merchandising Businesses
Revenues:
Sales
Expenses:
$121,700
LEARNING OBJECTIVES:
209. The following data were extracted from the accounting records of Dana Designs for the year ended March 31.
Inventory, April 1
$530,000
Inventory, March 31
375,000
Purchases
270,000
Purchase returns and allowances
25,000
Purchase discounts
10,000
Sales
770,000
Freight in
3,000
Prepare the gross profit and cost of goods sold section of the income statement for the year ended March 31, using the
periodic method.
Chapter 5 – Accounting for Merchandising Businesses
210. Prepare a multiple-step income statement for Armstrong Co. from the following data for the year ended December
31.
Sales, $755,000; cost of goods sold, $330,000; administrative expenses, $35,000; interest expense, $30,000; rent revenue,
$25,000; selling expenses, $50,000.
Chapter 5 – Accounting for Merchandising Businesses
211. 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 retained earnings.
Revenues:
Sales
$950,000
$960,000
Expenses:
$550,000
Total expenses
$218,000
Retained earnings, October 1
$ 25,000
$218,000
Dividends
Change in retained earnings
Retained earnings, September 30
$178,000
Chapter 5 – Accounting for Merchandising Businesses
212. 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.
Sales
$534,440
Cost of goods sold
Gross profit
$353,000
Operating expenses:
$65,000
Income from operations
$259,250
Other revenue and expense:
$257,150
213. 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.
Oct. 31
Cost of Goods Sold
Chapter 5 – Accounting for Merchandising Businesses
214. Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual inventory system.
Inventory
$ 45,500
Cost of Goods Sold
652,500
Income Summary
Cost of Goods Sold
LEARNING OBJECTIVES:
215. The records of Penny Co. indicated that $415,000 of merchandise should be on hand on December 31. The physical
inventory indicates that $370,000 of merchandise is actually on hand. Journalize the adjusting entry for the inventory
shrinkage for the year ended December 31.
Journal
Date
Description
Post.
Ref.
Debit
Credit
Cost of Goods Sold
LEARNING OBJECTIVES:
216. Based upon the following data for a business with a periodic inventory system, determine the cost of goods sold for
August.
Inventory, August 1
$ 75,560
Inventory, August 31
96,330
Purchases
373,880
Purchases returns & allowances
14,760
Purchases discounts
10,900
Freight in
4,135
Chapter 5 – Accounting for Merchandising Businesses
Match each of the following terms (a–h) with the correct definition below.
a.
Credit terms
b.
FOB destination
c.
FOB shipping point
d.
Periodic inventory system
e.
Perpetual inventory system
f.
Inventory shrinkage
g.
Single-step income statement
h.
Multiple-step income statement
DIFFICULTY:
Easy
Bloom’s: Remembering
LEARNING OBJECTIVES:
FNMN.WARD.17.05-02 – LO: 05–02
FNMN.WARD.17.05-03 – LO: 05–03
FNMN.WARD.17.05-04 – LO: 05–04
FNMN.WARD.17.05-APP – LO: 05-APP
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
217. Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise.
Inventory, August 1
Cost of merchandise purchased:
(10,900)
Inventory available for sale
Inventory, August 31
DIFFICULTY:
Bloom’s: Applying
Chapter 5 – Accounting for Merchandising Businesses
218. Losses of inventory due to theft, damage, spoilage, etc. that cause the actual inventory on hand to be less than that on
record.
219. Statement where net income is determined by deducting all expenses from all revenues.
220. Payment arrangements determined by the seller as to when invoices are due and whether early payment discount is
offered.
221. Inventory system that updates the inventory account for every purchase and sale transaction.
222. Inventory system that updates the inventory account only at the end of the accounting period based on a physical
count of inventory on hand.
223. Statement that includes subtotals for sales, gross profit, and income from operations in determining net income.
224. Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to
the freight carrier.
Match each of the following items (a–h) with the appropriate definition below.
a.
Freight
b.
Delivery Expense
c.
Inventory
d.
Sales discount
e.
Purchases Returns and Allowances
f.
Debit memo
g.
Purchases discount
h.
Trade discount
DIFFICULTY:
Easy
Bloom’s: Remembering
LEARNING OBJECTIVES:
FNMN.WARD.17.05-02 – LO: 05–02
FNMN.WARD.17.05-APP – LO: 05-APP
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.04 – Cash vs. Accrual
ACCT.ACBSP.APC.06 – Recording Transactions
ACCT.ACBSP.APC.07 – Adjusting Entries
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
225. Discount taken by the buyer for early payment of invoice.
Chapter 5 – Accounting for Merchandising Businesses
226. Account used to record inventory on hand under a perpetual inventory system.
227. Early payment discount offered to customers by the seller.
228. Expense account for recording shipping costs paid by the seller.
229. Discount to government agencies or customers who purchase large quantities of merchandise.
230. Account where returned merchandise or price adjustments are recorded by the buyer under the periodic inventory
system.
231. The cost associated with delivery of merchandise to the customer.
232. Informs the seller of the reasons for the return of merchandise or the request for a price allowance.