978-0077633059 Chapter 4 Solution Manual Part 5

subject Type Homework Help
subject Pages 9
subject Words 1522
subject Authors John Wild, Ken Shaw

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PROBLEM SET B
Problem 4-1B (40 minutes)
May 2 Merchandise Inventory...................................... 10,000
Accounts Payable—Havel......................... 10,000
Purchased goods on credit, terms 1/15, n/30.
5 Merchandise Inventory...................................... 250
Cash............................................................. 250
Paid freight on incoming goods.
9 Cash.................................................................... 2,500
Sales............................................................ 2,500
Sold goods for cash.
12 Accounts Payable—Duke................................. 400
Merchandise Inventory.............................. 400
Received credit memo from returning
goods to supplier.
14 Cash.................................................................... 10,780
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Problem 4-1B (Concluded)
May 17 Accounts Payable—Havel................................ 10,000
Merchandise Inventory *............................ 100
Cash............................................................. 9,900
Paid payable in discount period (*10,000 x 1%).
22 Sales Returns and Allowances........................ 400
Accounts Receivable—Tameron............... 400
Issued credit memo for allowances on
goods sold to customers.
([$2,800 - $400] x 2%)
31 Accounts Receivable—Heather....................... 7,200
Sales............................................................ 7,200
Sold goods on credit with terms 2/10, n/60.
31 Cost of Goods Sold.......................................... 3,600
Merchandise Inventory.............................. 3,600
To record cost of the May 31 sale.
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Problem 4-2B (40 minutes)
July 3 Merchandise Inventory.................................... 15,000
Accounts Payable—OLB.......................... 15,000
Purchased goods on credit, terms 1/10, n/30.
10 Merchandise Inventory.................................... 14,700
Accounts Payable—Rupert...................... 14,700
Purchased goods on credit, terms 1/10, n/45.
11 Delivery Expense.............................................. 300
Cash........................................................... 300
Paid shipping charges on July 7 sale.
14 Accounts Payable—Rupert............................. 2,000
Merchandise Inventory............................. 2,000
Received a credit memorandum for
July 10 purchase.
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Problem 4-2B (Concluded)
July 17 Cash................................................................... 9,457
Sales Discounts*.............................................. 193
Accounts Receivable—Brill..................... 9,650
Collected receivable within discount period.
*($11,500 - $1,850) x 2%
20 Accounts Payable—Rupert*............................ 12,700
Merchandise Inventory**.......................... 122
Cash........................................................... 12,578
Paid payable within discount period.
*$14,200 + $500 - $2,000 = $12,700
**($14,200 - $2,000) x 1% = $122
30 Cash................................................................... 9,603
Sales Discounts*.............................................. 97
Accounts Receivable—Brown................. 9,700
Collected receivable within discount period.
*($11,000 - $1,300) x 1%
31 Accounts Payable—OLB................................. 14,850
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Problem 4-3B (40 minutes)
1. Net sales
Sales................................................................................. $332,650
Less: Sales discounts.................................................... (5,875)
Sales returns and allowances............................. (20 ,000 )
Net sales........................................................................... $306 ,775
2. Cost of merchandise purchased
Invoice cost of merchandise purchases....................... $138,500
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Problem 4-3B (Continued)
3. Multiple-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2015
Sales $332,650
Less: Sales discounts $ 5,875
Sales returns and allowances 20 ,000
25,875
Net sales 306,775
Cost of goods sold * 115 ,600
Gross profit 191,175
Expenses
Selling expenses
Total general and administrative expenses 45 ,650
Total expenses 136 ,000
Net income $ 55 ,175
*Cost of goods sold (alternative computation):
Merchandise inventory, March 31, 2014 $ 37,500
Total cost of merchandise purchases (from part 2) 134 ,600
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Problem 4-3B (Concluded)
4. Single-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2015
Net sales $306,775
Expenses
Cost of goods sold $115,600
Selling expenses* 90,350
Problem 4-4B (30 minutes)
Part 1
Closing entries
March 31 Sales .................................................................. 332,650
Income Summary.......................................... 332,650
To close temporary accounts with credit balances.
March 31 Income Summary............................................... 277,475
Sales Discounts ........................................... 5,875
Sales Returns and Allowances ................... 20,000
Cost of Goods Sold...................................... 115,600
Sales Salaries Expense................................ 44,500
Rent Expense, Selling Space....................... 16,000
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Problem 4-4B (Concluded)
Part 2
The first step is to determine the amount of purchases that were subject to
a discount during the year:
Invoice cost of merchandise purchases........................... $138,500
Total cost of merchandise purchases payable................. $131 ,800
This amount is used to determine the maximum discount, which is then
compared to the actual discount:
Maximum discount available (3% x $131,800) .................. $ 3,954
Purchase discounts received.............................................. (2 ,950 )
This analysis suggests that about 25% of available discounts have been
missed. As a result, it would appear that cash is not being well managed.
Management should try to identify a better system for ensuring that all
Part 3
First, we compute this years sales returns and allowances rate:
Sales..................................................................................... $ 332,650
This calculation shows that the company’s customers are returning or
requiring allowances on items at a higher rate than the 5% rate observed in
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Problem 4-5B (60 Minutes)
Part 1
Adjustment (a)
Oct. 31 Store Supplies Expense.................................... 6,000
Store Supplies............................................ 6,000
To record store supplies expense
($9,700 - $3,700).
Adjustment (d)
Oct. 31 Cost of Goods Sold........................................... 2,700
Merchandise Inventory.............................. 2,700
To adjust inventory for shrinkage
($24,000 - $21,300).
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Problem 4-5B (Continued)
Part 2 Multiple-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2015
Sales.......................................................................... $227,100
Less: Sales discounts............................................. $ 1,000
Sales returns and allowances..................... 5 ,000
6,000
Net sales................................................................... 221,100
Cost of goods sold *................................................ 78 ,500
Gross profit............................................................... 142,600
Expenses
Selling expenses
Total expenses........................................................ 118 ,600
Net income................................................................ $ 24 ,000
* $78,500 = $75,800 + $2,700 (shrinkage)
** Salaries and rent expenses are equally divided between selling and general and administrative.
Part 3 Single-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2015
Net sales................................................................... $221,100
Expenses
Cost of goods sold.............................................. $78,500
Selling expenses................................................. 71,300*

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