Title: Exercise 5-3
QA_Ori:
1. BUYER- Santa Fe Company
a) Credit Purchase
Merchandise Inventory 24,000
2. SELLER – Mesa Company
a) Credit Sale
Accounts Receivable 24,000
3.
Amount borrowed to pay with discount $23,280
Annual rate of interest x 8%
$1,862.4
*Rounded; if not rounded, the net savings are $464.88
*Rounded; if not rounded, the net savings are $464.88
Title: Exercise 5-4
QA_Ori:
5-May Accounts Receivable 21,000
Sales 21,000
a.
7-May Sales Returns and Allowances 2,800
Accounts Receivable 2,800
b.
8-May Sales Returns and Allowances 600
c.
15-May Sales Returns and Allowances 680
Accounts Receivable 680
15-May Merchandise Inventory 400
Title: Exercise 5-5
QA_Ori:
5-May Merchandise Inventory
21,00
0
21,00
a.
7-May Accounts Payable 2,800
b.
8-May Accounts Payable 600
c.
15-May Accounts Payable 680
Title: Exercise 5-6
QA_Ori:
In today’s competitive world, organizations must concentrate on meeting their
customers’ needs and avoiding dissatisfaction. If these needs are not met and
An important early step in controlling returns is to have information about their
dollar amount. In addition, managers can set goals for reducing the dollar
While a company’s sales return record is important for managers, it is also
valuable information for external decision makers. This information can help
Title: Exercise 5-7
QA_Ori:
1. Entries for Sydney Company (BUYER):
11-May Merchandise Inventory 40,000
Accounts Payable 40,000
Purchased merchandise on credit.
2. Entries for Troy Corporation (SELLER):
11-May Accounts Receivable 40,000
Sales 40,000
Sold merchandise on account.
11-May Cost of Goods Sold 30,000
Title: Exercise 5-8
QA_Ori:
Merchandise Inventory
Balance, Dec. 31, 2012 25,000 Purchase discounts received 1,700
Cost of Goods Sold
Cost of sales transactions…
Inventory shrinkage
196,000
Returns by customers and
restored to inventory………………………………………………………………….2,100
Title: Exercise 5-9
QA_Ori:
Adjusting entries
31-Dec Sales Salaries Expense 1,700
Salaries Payable 1,700
To record accrued salaries.
Closing entries
31-Dec Sales
529,00
0
Income Summary 529,000
To close temporary accounts with credit
balances.
444,75
QA_Edit:
Title: Exercise 5-10
QA_Ori:
Note: The original missing numbers are blocked.
(a) (b) (c) (d) (e)
Sales…………………….. $62,000 $43,500 $46,000 $79,000 $25,600
Cost of goods sold
Merch. inv. (beg.)…… 8,000 17,050 7,500 8,000 4,560
Total cost of merch.
purchases……………. 38,000 1,950 43,750 32,000 6,600
(a) (b) (c) (d) (e)
Sales $62,000 $43,500 $46,000 $79,000 $25,600
Cost of goods sold
Merch. inv. (beg.) 8,000 17,050 7,500 8,000 4,560
Explanations:
a. Find merchandise inventory (ending) by subtracting cost of goods sold from
b. Find total cost of merchandise purchases by finding the number that makes the
c. Find cost of goods sold from sales less gross profit. Find cost of merchandise
d. Calculate cost of goods sold as usual. Calculate sales as gross profit plus cost
of goods sold.
QA_Edit:
Note: The original missing numbers are blocked.
Title: Exercise 5-11
QA_Ori:
The employee’s oversight in omitting these goods from the physical count would
cause the cost of the physical count of ending inventory to be understated.
As a result of this error:
Return on assets would be understated (numerator impact outweighs the
denominator impact).
Title: Exercise 5-12
QA_Ori:
See the solution explanation in Title: Exercise 5-11. As a result of this error:
Gross margin (gross profit/sales) would be understated because the gross
Title: Exercise 5-13
QA_Ori:
Case X Case Y Case Z
Current ratio computation
Acid-test ratio computation
Cash………………………………….. $2,000 $ 110 $1,000
Short-term investments………… 0 0 600
Case X Case Y Case Z
Current ratio computation
Acid-test ratio computation
Cash $2,000 $ 110 $1,000
Interpretation:
Case X has the highest acid-test ratio and a healthy current ratio. Since Case X
Specifically, Case Y exhibits the superior ability to meet current year obligations
using the current ratio and Case X has the superior ability to meet near-term
In summary, Case Z looks the worst for its ability to pay its immediate and current
year obligations. Case X looks the strongest. Case Y is in between with a
strong current ratio and the lowest acid-test ratio.