Type
Solution Manual
Book Title
Financial Accounting Fundamentals 5th Edition
ISBN 13
978-0078025754

### 978-0078025754 Chapter 4 Solution Manual Part 3

March 26, 2020
Problem 4-2A (Concluded)
Aug. 15 Cash .................................................................... 4,508
Sales Discounts* ............................................... 92
Accounts ReceivableLaird .................... 4,600
29 Cash .................................................................... 4,257
Sales Discounts* ............................................... 43
Accounts ReceivableTux ....................... 4,300
Collected receivable within discount period.
Problem 4-3A (40 minutes)
1. Net sales
Sales ................................................................................
\$225,600
2. Cost of Merchandise purchased
Invoice cost of merchandise purchased .....................
\$ 92,000
Problem 4-3A (Continued)
3. Multiple-step income statement
VALLEY COMPANY
Income Statement
For Year Ended August 31, 2015
Sales .................................................................... \$225,600
Less: Sales discounts ....................................... \$ 2,250
Sales returns and allowances ............... 12,000 14,250
Net sales ............................................................. 211,350
Cost of goods sold * .......................................... 74,500
Gross profit ........................................................ 136,850
Expenses
*Cost of goods sold (alternative computation):
Problem 4-3A (Concluded)
4. Single-step income statement
VALLEY COMPANY
Income Statement
For Year Ended August 31, 2015
Net sales .................................................................. \$211,350
Expenses
Problem 4-4A (30 minutes)
Part 1
Closing entries
Aug. 31 Sales ............................................................. 225,600
Income Summary .................................. 225,600
To close temporary accounts with
credit balances.
Aug. 31 Income Summary ......................................... 175,750
Sales Discounts ................................... 2,250
Sales Returns and Allowances ........... 12,000
Cost of Goods Sold .............................. 74,500
To close the dividends account.
Problem 4-4A (Concluded)
Part 2
The first step is to determine the amount of purchases that are subject to a
This amount is used to determine the maximum discount, which is then
compared to the actual discount:
This analysis suggests that nearly 24% of available discounts have been
missed. As a result, it would appear that cash is not being well managed.
Part 3
The first step is to compute this year’s sales returns and allowances rate:
This calculation shows that the company’s customers are returning or
Problem 4-5A (60 minutes)
Part 1
Jan 31 Store Supplies Expense ................................... 4,050
Store Supplies ............................................ 4,050
Problem 4-5A (Continued)
Part 2 Multiple-step income statement
NELSON COMPANY
Income Statement
For Year Ended January 31, 2015
Sales ......................................................................... \$111,950
Less: Sales discounts ............................................ \$ 2,000
Sales returns and allowances ..................... 2,200 4,200
Net sales ................................................................... 107,750
Cost of goods sold* ................................................ 40,000
Gross profit .............................................................. 67,750
Expenses
Problem 4-5A (Concluded)
Part 3 Single-step income statement
NELSON COMPANY
Income Statement
For Year Ended January 31, 2015
Net sales ................................................................ \$107,750
*From Part 2
Part 4
Current assets
Cash .............................................................................
Merchandise inventory ...............................................
Store supplies .............................................................
Prepaid insurance .......................................................
1,000*
Problem 4-6AB (50 minutes)
NELSON COMPANY
Work Sheet
For Year Ended January 31, 2015
Trial Balance
Trial Balance
Income
Statement
Balance Sheet
Account Title
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash ..........................................
1,000
1,000
1,000
Merchandise inventory ...........
12,500
(d)
1,600
10,900
10,900
Store supplies..........................
5,800
(a)
4,050
1,750
1,750
Prepaid insurance ...................
2,400
(b)
1,400
1,000
1,000
PROBLEM SET B
Problem 4-1B (40 minutes)
May 2 Merchandise Inventory ..................................... 10,000
Accounts PayableHavel ......................... 10,000
Purchased goods on credit, terms 1/15, n/30.
4 Accounts ReceivableHeather ....................... 11,000
5 Merchandise Inventory ..................................... 250
Cash ............................................................ 250
Paid freight on incoming goods.
9 Cash .................................................................... 2,500
Sales ............................................................ 2,500
Accounts PayableDuke ......................... 3,650
Purchased goods on credit, terms 2/15, n/60.
12 Accounts PayableDuke ................................. 400
Merchandise Inventory .............................. 400
*\$11,000 x 2%
Problem 4-1B (Concluded)
May 17 Accounts PayableHavel ............................... 10,000
Merchandise Inventory * ........................... 100
Cash ............................................................ 9,900
Paid payable in discount period (*10,000 x 1%).
To record cost of the May 20 sale.
22 Sales Returns and Allowances ....................... 400
Accounts ReceivableTameron .............. 400
Issued credit memo for allowances on
goods sold to customers.
30 Cash ................................................................... 2,352
Sales Discounts (2%) ....................................... 48
Accounts ReceivableTameron .............. 2,400
Collected receivable within discount period.
([\$2,800 - \$400] x 2%)
To record cost of the May 31 sale.
Problem 4-2B (40 minutes)
July 3 Merchandise Inventory .................................... 15,000
Accounts PayableOLB .......................... 15,000
Purchased goods on credit, terms 1/10, n/30.
Cost of Goods Sold .................................. 1,450
Returned goods to inventory.
14 Accounts PayableRupert ............................. 2,000
Merchandise Inventory ............................. 2,000
Problem 4-2B (Concluded)
July 17 Cash ................................................................... 9,457
Sales Discounts* .............................................. 193
Accounts ReceivableBrill ..................... 9,650
Collected receivable within discount period.
*\$14,200 + \$500 - \$2,000 = \$12,700
**(\$14,200 - \$2,000) x 1% = \$122
21 Accounts ReceivableBrown ........................ 11,000
Sales ........................................................... 11,000
Sold goods on credit, terms 1/10, n/30.
Issued credit memo.
30 Cash ................................................................... 9,603
Sales Discounts* .............................................. 97
Accounts ReceivableBrown ................. 9,700
Collected receivable within discount period.
Problem 4-3B (40 minutes)
1.
Net sales
Sales .................................................................................
\$332,650
2.
Cost of merchandise purchased
Invoice cost of merchandise purchases .......................
\$138,500