PROBLEM SET B
Problem 5-1B (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.
12 Accounts Payable—Duke..….……….……….….... 400
Merchandise Inventory…….…….……….…… 400
Received credit memo from returning
goods to supplier.
*$11,000 x 2%
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Problem 5-1B (Concluded)
May 17 Accounts Payable—Havel…………………….….… 10,000
Merchandise Inventory *………………………. 100
Cash………………………………………………….… 9,900
Paid payable in discount period (*10,000 x 1%).
25 Accounts Payable—Duke…………………………... 3,250
Merchandise Inventory *………………………. 65
Cash………………………………………………….… 3,185
Paid payable in discount period
[($3,650 – $400)x 2%].
30 Cash………………………………………..……….………. 2,352
Sales Discounts (2%)…..…….……….……….……. 48
Accounts Receivable—Tameron…………… 2,400
Collected receivable within discount period.
([$2,800 – $400] x 2%)
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Problem 5-2B (40 minutes)
July 3 Merchandise Inventory….…….……….……….….. 15,000
Accounts Payable—OLB…………….………. 15,000
Purchased goods on credit, terms 1/10, n/30.
11 Delivery Expense………………………………….…… 300
Cash………………………..…….……….……….… 300
Paid shipping charges on July 7 sale.
12 Sales Returns and Allowances…………………… 1,850
Accounts Receivable—Brill..….……......... 1,850
Customer returned merchandise.
15 Accounts Payable—OLB………….………….……. 150
Cash………………………..…….……….……….… 150
Paid freight for OLB Corp.
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Problem 5-2B (Concluded)
July 17 Cash……………………………………………….….…….. 9,457
20 Accounts Payable—Rupert*………….……….….. 12,700
**($14,200 – $2,000) x 1% = $122
21 Accounts Receivable—Brown………………….... 11,000
Sales………………………………………………….. 11,000
Sold goods on credit, terms 1/10, n/30.
21 Cost of Goods Sold…………………..…….………... 7,000
Merchandise Inventory………………….……. 7,000
To record cost of the July 21 sale.
31 Accounts Payable—OLB………….………….……. 14,850
Cash………………………..…….……….……….… 14,850
Paid $15,000 invoice less $150 freight paid
by Mason on request of OLB.
Problem 5-3B (40 minutes)
1. Net sales
Sales………………………………………………………….……….…. $332,650
2. Cost of merchandise purchased
Invoice cost of merchandise purchases…………..……… $138,500
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Problem 5-3B (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
Expenses
Selling expenses
Sales salaries expense 44,500
Rent expense—Selling space 16,000
Store supplies expense 3,850
Advertising expense 26 ,000
Total selling expenses 90,350
General and administrative expenses
*Cost of goods sold (alternative computation):
Merchandise inventory, March 31, 2014 $ 37,500
Total cost of merchandise purchases (from part 2) 134 ,600
Goods available for sale 172,100
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Problem 5-3B (Concluded)
4. Single-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2015
Net sales $306,775
Expenses
Net income $ 55 ,175
*From Part 3.
Problem 5-4B (30 minutes)
Part 1
Closing entries
March 31 Sales …………………………………….……….……….… 332,650
Income Summary……………………………….….. 332,650
To close temporary accounts with credit balances.
Sales Salaries Expense…………………….……. 44,500
Rent Expense, Selling Space………………….. 16,000
Store Supplies Expense………………….……… 3,850
Advertising Expense…………….……….………. 26,000
To close temporary accounts with debit balances.
March 31 Income Summary………………………………….….… 55,175
C. Barkley, Capital………………………………….. 55,175
To close the Income Summary account.
March 31 C. Barkley, Capital…………..……….……….……….. 3,000
C. Barkley, Withdrawals…………………………. 3,000
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Problem 5-4B (Concluded)
Part 2
The first step is to determine the amount of purchases that were subject to
a discount during the year:
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)
Purchase discounts missed…………………………..…….……… $ 1 ,004
As a percent of available discounts ($1,004/$3,954)….…….… 25.4%
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 year’s sales returns and allowances rate:
Sales…………………………………………………………..……….……. $ 332,650
This calculation shows that the company’s customers are returning or
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Education.
Problem 5-5B (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 (b)
Adjustment (c)
Adjustment (d)
Oct. 31 Cost of Goods Sold…………….……….……….……. 2,700
Merchandise Inventory…….…….……….…… 2,700
To adjust inventory for shrinkage
($24,000 – $21,300).
Problem 5-5B (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
Rent expense—Selling space**..…….……….….... 13,000
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Store supplies expense……………………..…….…… 6,000
Advertising expense……………………..………….….. 17 ,800
Total selling expenses…………………….……….…… 71,300
General and administrative expenses
* $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
* From part 2
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