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Financial & Managerial Accounting, 5th Edition
276
Problem 4-3B (Continued)
Part 2 Multiple-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2013
Sales ......................................................................... $227,100
Less: Sales discounts ............................................ $ 1,000
Sales returns and allowances ..................... 5,000 6,000
Net sales ................................................................... 221,100
Cost of goods sold * ............................................... 78,500
Gross profit .............................................................. 142,600
Expenses
Part 3 Single-step income statement
FOSTER PRODUCTS COMPANY
Income Statement
For Year Ended October 31, 2013
Net sales ................................................................... $221,100
Expenses
Cost of goods sold ............................................. $78,500
Problem 4-3B (Concluded)
Part 4
Current assets
Cash ........................................................................... $ 7,400
Merchandise inventory ............................................ 21,300
Store supplies ........................................................... 3,700
Problem 4-4B (40 minutes)
1.
Net sales
Sales .................................................................................
$332,650
Less: Sales discounts ....................................................
(5,875)
Sales returns and allowances .............................
(20,000)
Net sales ..........................................................................
$306,775
2.
Cost of merchandise purchased
Invoice cost of merchandise purchases .......................
$138,500
Purchase discounts received ........................................
(2,950)
Purchase returns and allowances ................................
(6,700)
Costs of transportation-in ..............................................
5,750
Total cost of merchandise purchases ..........................
$134,600
Financial & Managerial Accounting, 5th Edition
278
Problem 4-4B (Continued)
3. Multiple-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2013
Sales .................................................................... $332,650
Less: Sales discounts ...................................... $ 5,875
Sales returns and allowances ............... 20,000 25,875
Net sales ............................................................. 306,775
Cost of goods sold * .......................................... 115,600
Gross profit ........................................................ 191,175
Expenses
Selling expenses
Sales salaries expense .................................. 44,500
Problem 4-4B (Concluded)
4. Single-step income statement
BARKLEY COMPANY
Income Statement
For Year Ended March 31, 2013
Net sales ................................................................ $306,775
Expenses
Problem 4-5B (30 minutes)
Part 1
Closing entries
March 31 Sales .................................................................. 332,650
Income Summary .......................................... 332,650
To close temporary accounts with credit balances.
March 31 Income Summary ............................................... 277,475
Sales Discounts ........................................... 5,875
Sales Returns and Allowances ................... 20,000
Financial & Managerial Accounting, 5th Edition
280
Problem 4-5B (Concluded)
Part 2
The first step is to determine the amount of purchases that were subject to
a discount during the year:
Invoice cost of merchandise purchases ........................... $138,500
Purchase returns and allowances ..................................... (6,700)
Total cost of merchandise purchases payable ................ $131,800
further information is required to assess this possibility. It is possible that
the discounts not taken are actually not favorable to the company.
Part 3
First, we compute this year’s sales returns and allowances rate:
Sales ..................................................................................... $332,650
Sales returns and allowances ........................................... $ 20,000
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Problem 4-6BB (50 minutes)
FOSTER PRODUCTS COMPANY
Work Sheet
For Year Ended October 31, 2013
Unadjusted
Trial Balance
Adjustments
Adjusted
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash ...............................................................
7,400
7,400
7,400
Merchandise inventory .........................
24,000
(d)
2,700
21,300
21,300
Store supplies ............................................
9,700
(a)
6,000
3,700
3,700
Prepaid insurance ................................
6,600
(b)
2,800
3,800
3,800
Store equipment .......................................
81,800
81,800
81,800
Accum. depreciation—Store eq .............
32,000
(c)
3,000
35,000
35,000
Accounts payable ................................
18,000
18,000
18,000
Common stock .........................................
3,000
3,000
3,000
Retained earnings ................................
40,000
40,000
40,000
Dividends.....................................................
2,000
2,000
2,000
Sales ..............................................................
227,100
227,100
227,100
Sales discounts ........................................
1,000
1,000
1,000
Sales returns and allowances ............
5,000
5,000
5,000
Cost of goods sold ................................
75,800
(d)
2,700
78,500
78,500
Depreciation expense—Store eq ..........
0
(c)
3,000
3,000
3,000
Salaries expense ................................
63,000
63,000
63,000
Insurance expense ................................
0
(b)
2,800
2,800
2,800
Rent expense .............................................
26,000
26,000
26,000
Store supplies expense ........................
0
(a)
6,000
6,000
6,000
Advertising expense ..............................
17,800
______
_____
_____
17,800
______
17,800
______
______
______
Totals .............................................................
320,100
320,100
14,500
14,500
323,100
323,100
203,100
227,100
120,000
96,000
Net income ..................................................
24,000
______
______
24,000
Totals .............................................................
227,100
227,100
120,000
120,000
Financial & Managerial Accounting, 5th Edition
282
SERIAL PROBLEM — SP 4
Serial Problem — SP 4, Success Systems (150 minutes) Part 1
Journal entries
Jan. 4 Wages Expense ..............................................623 125
Wages Payable ...............................................210 500
Cash .........................................................101 625
Paid employee.
5 Cash .................................................................101 25,000
Common Stock.........................................307 25,000
Additional investment by owner for stock.
7 Merchandise Inventory ..................................119 5,800
Accounts Payable ...................................201 5,800
Purchased merchandise on credit.
Serial Problem — SP 4 (Continued)
Jan. 17 Accounts Payable ..........................................201 5,800
Merchandise Inventory ...........................119 58
Cash .........................................................101 5,742
Paid account payable within discount period.
(Discount taken = $5,800 x .01 = $58)
20* Sales Returns and Allowances .....................414 500
Accounts Receivable—Liu Corp. ...........106.5 500
Customer returned defective goods.
* Success Systems leaves the cost of defective
products in its costs of goods sold. If it did not,
Financial & Managerial Accounting, 5th Edition
284
Serial Problem — SP 4 (Continued)
Feb. 1 Prepaid Rent ...................................................131 2,475
Cash .........................................................101 2,475
Paid three months’ rent in advance.
3 Accounts Payable ..........................................201 8,504
Merchandise Inventory ...........................119 90
Cash .........................................................101 8,414
Paid account payable within discount period.
January 26 purchase ........................ $9,000
Less credit allowed .......................... (496)
Serial Problem — SP 4 (Continued)
Mar. 8 Computer Supplies ........................................126 2,730
Accounts Payable ...................................201 2,730
Purchased supplies on credit.
9 Cash .................................................................101 3,220
Accounts Rec.—Delta Co. ......................106.7 3,220
Collected accounts receivable.
Financial & Managerial Accounting, 5th Edition
286
Serial Problem — SP 4 (Continued)
Part 2
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 58,160
Jan. 4 625 57,535
5 25,000 82,535
9 2,668 85,203
15 600 84,603
16 4,000 88,603
17 5,742 82,861
Accounts Receivable—Alex’s Engineering Co. Acct. No. 106.1
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Serial Problem — SP 4 (Continued)
Accounts Receivable—Easy Leasing Acct. No. 106.3
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Mar. 24 8,900 8,900
Accounts Receivable—IFM Co. Acct. No. 106.4
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 3,000
Financial & Managerial Accounting, 5th Edition
288
Serial Problem — SP 4 (Continued)
Accounts Receivable—Dream, Inc. Acct. No. 106.9
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Merchandise Inventory Acct. No. 119
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 0
Jan. 7 5,800 5,800
13 3,560 2,240
15 600 2,840
17 58 2,782
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 1,665
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Serial Problem — SP 4 (Continued)
Accumulated Depreciation—Office Equipment Acct. No. 164
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 400
Computer Equipment Acct. No. 167
Date Explanation PR Debit Credit Balance
Wages Payable Acct. No. 210
Date Explanation PR Debit Credit Balance
Dec. 31 Balance 500
Jan. 4 500 0
Unearned Computer Services Revenue Acct. No. 236
Date Explanation PR Debit Credit Balance
