VISUAL #5-3
ACCOUNTS USED IN BASIC MERCHANDISING TRANSACTIONS
WITH A PERPETUAL INVENTORY SYSTEM
ASSETS LIABILITIES
REVENUES
& CONTRA-REV.
Cash
Accounts
Payable Sales
Dr. Bal. Cr. Bal. Cr. Bal.
+ + +
Accounts
Receivable
Sales Returns &
Allowance
Dr. Bal. Dr.
Bal.
+ COST +
Cost of Goods
Sold
Dr.
Bal.
Merchandise
Inventory
+ Sales
Discount
Dr. Bal. Dr.
Bal.
+ +
EXPENSE
Delivery
Expense
Dr.
Bal.
+
VISUAL #5-4
ACCOUNTS USED IN BASIC MERCHANDISING TRANSACTIONS
WITH A PERIODIC INVENTORY SYSTEM
ASSETS LIABILITIES
REVENUES
& CONTRA-REV.
COST &
CONTRA-COST
Cash
Accounts
Payable Sales Purchases
Dr. Bal. Cr. Bal. Cr. Bal. Dr. Bal.
+ + + +
Accounts
Receivable
Sales Returns &
Allowance
Purchase Returns
& Allowances
Dr. Bal. Dr.
Bal.
Cr. Bal.
+ + +
Merchandise
Inventory
Sales
Discount
Purchases
Discount
Dr. Bal. Dr.
Bal.
Cr. Bal.
+ + +
Transportation-In
EXPENSE Dr. Bal.
Delivery
Expense
+
Dr. Bal
+
Alternate Demonstration Problem #1
Chapter Five
The following data was taken from ledger account balances and
supplementary data for the Whisk Company. Whisk Company uses
periodic inventory method to account for its inventory.
Merchandise inventory, beginning……………………………………….. $ 20,000
Merchandise inventory, ending……………………………………………. 23,000
Purchases………………………………………………………………………….. 215,000
Purchases discounts………………………………………………………….. 6,000
Purchases returns and allowances………………………………………. 3,000
Sales…………………………………………………………………………………. 400,000
Sales discounts………………………………………………………………….. 3,200
Sales returns and allowances……………………………………………… 1,800
Transportation-in………………………………………………………………… 10,000
Required:
Show the computation, in Income Statement format, of net sales, cost of
goods sold, and gross profit for the year ended December 31, 20XX.
Solution: Alternate Demonstration Problem #1
Chapter Five
WHISK COMPANY
Income Statement
For the Year Ended December 31, 20XX
Revenue from sales:
Sales…………………………………. $400,000
Less: Sales discounts……...… $ 3,200
Sales returns and
allowances…………….. 1,800 5,000
Net sales……………………………. 395,000
Cost of goods sold:
Merchandise inventory, 1/1/XX 20,000
Purchases…………………………. $215,000
Less: Purchase discounts…… $6,000
Purchases returns and
allowances…………….. 3,000 9,000
Net purchases……………………. 206,000
Add transportation-in……..….. 10,000
Cost of goods purchased……. 216,000
Goods available for sale……… 236,000
Merchandise inventory, 12/31/XX 23,000
Cost of goods sold………………... 213,000
Gross profit from sales……...….. $182,000
Alternate Demonstration Problem #2
Chapter Five
Koda Company is a wholesale company that had the following purchase and sales
transactions related to its merchandise inventory during the month of May.
May 1 Purchased $20,000 of merchandise on account from Webber Mfg. Co.
Credit terms: 2/10, n/30. FOB shipping point
2 Received and paid the $1,000 shipping bill from Interstate Shipping for
the goods purchased on March 1
6 Received a credit memo for the return of $5,000 of the goods purchased
on March 1 which had arrived damaged.
10 Paid Webber Mfg. Co. the amount due.
15 Sold merchandise on account to Dover Company for $5,000. The cost of
the merchandise was $3,000. (cost is 60% of the retail value) Terms:
2/10, n/30; FOB Destination
16 Paid Crosstown Shipping $100 to deliver the goods sold on March 15
17 Dover returned $1,000 of the goods they purchased on March 15. You
had sent them the wrong merchandise.
24 Received the amount due from Dover Co.
Requirement 1: Record the transactions assuming Koda Company uses perpetual
inventory system
Requirement 2: Record the transactions assuming that Koda Company uses periodic
system.
Solution: Alternate Demonstration Problem #2
Chapter Five
PERPETUAL INVENTORY SYSTEM PERIODIC INVENTORY SYSTEM
5-1 Inventory 20,000 5-1 Purchases 20,000
Accounts Payable 20,000 Accounts Payable 20,000
2 Inventory 1,000 2 Freight-In 1,000
Cash 1,000 Cash 1,000
6 Accounts Payable 5,000 6 Accounts Payable 5,000
Inventory 5,000 Purchase R & A 5,000
10 Accounts Payable 15,000 10 Accounts Payable 18,000
Inventory 300 Purch. Discount 300
Cash 14,700 Cash 14,700
15 Accts Receivable 5,000 15 Accts Receivable 5,000
Sales 5,000 Sales 5,000
15 Cost of Goods Sold 3,000
Inventory 3,000
16 Delivery Expense 100 16 Delivery Expense 100
Cash 100 Cash 100
17 Sales R & A 1,000 17 Sales R & A 1,000
Accts Receivable 1,000 Accts Receivable 1,000
17 Inventory 600
Cost of Goods
sold
600
24 Cash 3,920 24 Cash 3,920
Sales Discount 80 Sales Discount 80
Accts Receivable 4,000 Accts Receivable 4,000