Jan 2 24,250
Accounts Pa
y
able
(
Shar
p)
24,250
d.
Jan 2 24,250
Accounts Pa
y
able
(
Shar
p)
24,250
e.
500,000$
24,250
PROBLEM 6.8
A
b.
2016
General Journal
CPI (concluded)
Inventory
Purchased merchandise on account; terms, 3/10,
Add: Purchases
Inventory (Dec. 31, 2015)
Purchases
Computation of cost of goods sold:
Sale on account; terms, 5/10, n/90.
Purchased merchandise on account; terms, 3/10,
Journal entries assuming use of periodic system:
2016
35 Minutes, Medium
A
p
r 15 19,700
Sales 19,700
15 10,300
SOLUTIONS TO PROBLEMS SET B
Accounts Receivable
Sold merchandise on account.
Cost of Good Sold
PROBLEM 6.1B
a.
BIG OAK LUMBE
R
General Journal
c.
Big Oak Industry
Lumber Average Difference
$1,422,000 $1,000,000 $422,000
PROBLEM 6.1B
BIG OAK LUMBER (concluded)
Big Oak seems quite able to pass its extra transportation costs on to its customers and, in
fact, enjoys a significant financial benefit from its remote location. The following data
support these conclusions:
Annual sales ……………………………..
average because of the additional transportation charges.
To have a higher-than-average cost of goods sold and still earn a much larger-than-average
amount of gross profit, Big Oak must be able to charge substantially higher
sales prices than most hardware stores. Presumably, the company could not charge such
prices in a highly competitive environment. Thus, the remote location appears to
a.
384,000$ 4,000
380,000 157,630 222,370
400$
7,000 900
c.
d.
f. The operating cycle is the time required to purchase inventory, sell the inventory, and
The use of the Purchase Discounts Lost account indicates that the store records
purchases net of any purchase discounts. Had the store recorded purchases at their
taxes are applicable only when merchandise is sold to the final customer ; thus, retail
stores normally incur no sales taxes expense.
b. Gross profit Net sales = gross profit margin
Sales returns and allowances amount to only 1% of the store’s total sales. Thus, it
Net sales
PROBLEM 6.2B
HARRY’S HABERDASHER
Y
Sales
HARRY’S HABERDASHERY
For the Year Ended December 31, 2015
Income Statement
15 Minutes, Easy
Less: Sales returns and allowances
Net income
Cost of goods sold
Other expenses:
Purchase discounts lost
Utilities expense
Gross profit
20 Minutes, Medium
2015-2016 2014-2015
a. 1. 3.8% (1) 7.5% (2)
2. Change in net sales per square foot………
…
(1.4%) (3) (3.8%) (4)
b. While Pete’s 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
PETE’S AUTO PARTS
PROBLEM 6.3B
Change in net sales…………………………
30 Minutes Medium
(1)
Mar. 6 2,744
Accounts Pa
y
able
(
Whosa Industries
)
2,744
11 1,200
Sales 1,200
y
(
)
PROBLEM 6.4B
a.
General Journal
MARY’S TV
per unit ($350, less 2%).
Inventory
To record purchase of 8 TVs at net cost of $343
Date
Cash
c.
PROBLEM 6.4B
MARY’S TV (concluded)
The net cost method provides more useful information for evaluating the company’s
efficiency in paying its bills. This method clearly indicates the lowest price that the
30 Minutes Medium
a.
Oct. 12 18,000
Sales 18,000
12 6,000
Inventor
y
6,000
PROBLEM 6.5B
Journal entries by Hip Pants:
General Journal
HIP PANTS AND SLEEK
Accounts Receivable (Sleek)
Sold merchandise on account; terms, 1/10, n/30.
Cost of Goods Sold
To record cost of merchandise sold (300 pr. X $20/pr.).
Education.
Oct 22 17,582.40
c.
Yes. Sleek should take advantage of 1/10, n/30 purchase discounts, even if it must borrow
money for a short period of time at an annual rate of 12%. By taking advantage of the
PROBLEM 6.5B
Accounts Payable (Hip Pants)
General Journal
HIP PANTS AND SLEEK (concluded)
60 Minutes, Strong
a.
Jan. 7 4,900
Cash………………………………………. 4,900
Dec. 23 No entry since no cash receipt or payment was involved.
Dec. 26 No entry since no cash receipt or payment was involved.
Entries that Should Have Been Recorded by the Accounting Clerk
Jan. 7 Accounts Payable………………………………….. 4,900
Cash………………………………………. 4,900
a.1.
b. Net income is understated by $2,750 ($15,000 – $12,250).
PROBLEM 6.6B
QUEEN 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 Record by the Accounting Clerk
Based on a comparison of the above entries, accounts receivable is understated by
$15,000.
Payment for furniture received on December 20th
of prior year.
Payment for furniture received on December 20th
of prior year.
Inventory……………………………………………
15,000
d.
Accounts receivable………………………………… 15,000
e.
PROBLEM 6.6B
QUEEN ENTERPRISES (concluded)
The journal entry to correct the accounting clerk’s errors is (assuming that Queen’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
Queen’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 Queen’s books
have been closed for the year).