c.
Claypool Industry
Hardware Average Difference
$1,024,900 $1,000,000 $24,900
additional transportation charges.
To have a higher-than-average cost of goods sold and still earn a much larger-than-
average amount of gross profit, Claypool must be able to charge substantially higher
sales prices than most hardware stores. Presumably, the company could not charge such
prices in a highly competitive environment. Thus, the remote location appears to
insulate it from competition and allow it to operate more profitably than hardware stores
with nearby competitors.
Annual sales ……………………………..
PROBLEM 6.1
A
CLAYPOOL HARDWARE (concluded
)
Claypool seems quite able to pass its extra transportation costs on to its customers and, in
fact, enjoys a significant financial benefit from its remote location. The following data
support these conclusions:
a.
226,000$ 2,500
223,500 100,575 122,925
250$
PROBLEM 6.2
A
HENDRY’S BOUTIQUE
Sales
HENDRY’S BOUTIQUE
For the Year Ended December 31, 2015
Income Statement
15 Minutes, Easy
Net sales
Cost of goods sold
Gross profit
Other expenses:
Less: Sales returns and allowances
Purchase discounts lost
Education.
201
5-
2016
2014
–
201
5
1. 6% (1) 8% (2)
2. (1.1%) (3) (2.7%) (4)
(5)
(6)
b.
PROBLEM 6.3A
KNAUSS SUPERMARKETS
20 Minutes, Medium
While Knauss has increased its overall revenue from sales, several of the statistics indicate
problems. Both sales per square foot of selling space and comparable store sales have
a.
Change in net sales …………………….
Change in net sales per square foot ….
($11.0 $11.4) $11.4 = (3.5%)
($10.8 $11.0) $11.0 = (1.8%)
30 Minutes, Medium
Date
(1)
A
p
ril 10 5,880
Accounts Pa
y
able
(
Polar Co.
)
5,880
15 900
Sales 900
15 588
y
(
)
15 600
Inventor
600
20 6,000
Cash 5,880
Purchase Discounts Taken 120
b.
Ma
y
10 6,000
Cash 6,000
Cost of Goods Sold
Accounts Payable (Polar Co.)
Made payment after discount period had expired.
Paid account payable, less 2%.
Sold 1 Polar refrigerator for cash.
Accounts Payable (Polar Co.)
To record cost of refrigerator sold.
Cash
Sold 1 Polar refrigerator for cash.
Cost of Goods Sold
PROBLEM 6.4
A
a.
General Journal
KITCHEN ELECTRICS
$588 per unit ($600, less 2%).
Inventory
To record purchase of 10 refrigerators at net cost of
p
c.
PROBLEM 6.4
A
KITCHEN ELECTRICS (concluded)
The net cost method provides more useful information for evaluating the company’s
30 Minutes, Strong
a. Journal entries by Siogo Shoes:
Feb . 9 10,000
Sales 10,000
(
)
Cost of Goods sold 600
19 8,910 90
Accounts Receivable
(
Sole Mates
)
9,000
b.
Feb. 9 9,900
Accounts Pa
y
able
(
Sio
g
o Shoes
)
9,900
Inventor
990
PROBLEM 6.5
A
returned (10 pr. X $60/pr.).
Cash
Inventory
Collected amount due, less $1,000 return and less
Reduce cost of goods sold for cost of merchandise
SIOGO SHOES AND SOLE MATES
Accounts Receivable (Sole Mates)
Sold merchandise on account; terms, 1/10, n/30.
1% cash discount on remaining $9,000 balance.
Journal entries by Sole Mates:
Returned 10 pairs of boots to supplier. (Net cost,
General Journal
$99 per pair x 10 pairs = $990.
Sales Discount
y
Feb . 19 8,910
Cash 8,910
PROBLEM 6.5
A
General Journal
SIOGO SHOES AND SOLE MATES (concluded)
Siogo Shoes ($9,900 – $990 = $8,910).
Accounts Payable (Siogo Shoes)
60 Minutes, Strong
a.
Jan. 10 9,800
Dec. 30 No entry since no cash receipt or payment was involved.
Entries that Should Have Been Recorded by the Accounting Clerk
Jan. 10 Accounts Payable……………………………….. 9,800
Cash……………………………………. 9,800
Dec. 27 Inventory……………………………………….. 19,600
Accounts Payable……………………. 19,600
a.1.
a.3. Accounts payable is understated by $9,800 ($19,600 – $9,800).
a.5. Cost of goods sold is understated by $24,500.
b. Net income is understated by $5,500 ($30,000 – $24,500).
PROBLEM 6.6
A
KING ENTERPRISES
The easiest way for a student to solve this problem is to record the journal entries that the
accounting clerk made and to compare them with the journal entries that should have
been made.
Entries Recorded by the Accounting Clerk
Based on a comparison of the above entries, accounts receivable is understated by
$30,000.
Payment for books received on December 15th of
prior year.
Inventory…………………………………………
30,000
d.
e.
PROBLEM 6.6
A
KING ENTERPRISES (concluded)
The journal entry to correct the accounting clerk’s errors is (assuming that King’s books
have yet to be closed for the year).
The journal entry to correct the accounting clerk’s errors assuming that the ending
inventory balance has been adjusted based on a physical inventory (and assuming that
Kin
g
‘s books have been closed for the
y
ear
)
is:
Accounts receivable………………………………..
c.
The journal entry to correct the accounting clerk’s errors is (assuming that King’s books
have been closed for the year).
30 Minutes, Strong
a. $ 525,000
PROBLEM 6.7
A
THOMPSON PLUMBING
Sales ($150,000 + $375,000)
a.
40 Minutes, Strong PROBLEM 6.8
A
CPI
Parts a, f, and g follow; parts b, c, d, and e are on the next page.
The operating cycle of a merchandising company consists of purchasing merchandise,