EXERCISES
Exercise 4-1 (30 minutes)
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
Merch. inv. (end.) …….
(11,950)
(3,000)
(9,000)
(6,600)
(4,160)
Cost of goods sold ….
34,050
16,000
42,250
33,400
7,000
Gross profit ……………..
27,950
27,500
3,750
45,600
18,600
Expenses …………………
10,000
10,650
12,150
3,600
6,000
Net income (loss) ……..
$17,950
$16,850
$ (8,400)
$42,000
$12,600
Explanations:
a. Find merchandise inventory (ending) by subtracting cost of goods sold from goods
Exercise 4-2 (10 minutes)
Operating cycle of a merchandiser with credit sales follows (chronological):
Exercise 4-3 (20 minutes)
In today’s competitive world, organizations must concentrate on meeting their
customers’ needs and avoiding dissatisfaction. If these needs are not met
and dissatisfaction grows, the customers will deal with other companies or
entities. One measure of dissatisfaction of customers is the amount of sold
users.
Exercise 4-4 (30 minutes)
Apr. 2 Merchandise Inventory ………………………………. 4,600
Accounts Payable—Lyon …………………….. 4,600
Purchased merchandise on credit.
3 Merchandise Inventory ………………………………. 300
Exercise 4-5 (30 minutes)
May 5 Accounts Receivable ………………………………… 21,000
Sales …………………………..……………………… 21,000
Sold merchandise on credit (1,500 x $14).
5 Cost of Goods Sold …………………………………… 15,000
Exercise 4-6 (15 minutes)
May 5 Merchandise Inventory …………………………..…. 21,000
Accounts Payable ………………………………. 21,000
Purchased merchandise on credit (1,500 x $14).
a.
Exercise 4-7 (30 minutes)
1. BUYER- Santa Fe Company
a) Credit Purchase
Merchandise Inventory …………………………..…. 24,000
2. SELLER – Mesa Company
a) Credit Sale
Accounts Receivable ………………………………… 24,000
Sales…………………………..……………………… 24,000
3. Amount borrowed to pay with discount ………………….. $ 23,280
Annual rate of interest …………………………………………… x 8%
Exercise 4-8 (25 minutes)
1. Entries for Sydney Company (BUYER):
May 11 Merchandise Inventory ……………………………. 40,000
Accounts Payable ……………………………… 40,000
Purchased merchandise on credit.
2. Entries for Troy Corporation (SELLER):
May 11 Accounts Receivable ……………………………….. 40,000
Sales…………………………..…………………….. 40,000
Sold merchandise on account.
Exercise 4-9 (30 minutes)
Merchandise Inventory
Balance, Dec. 31, 2014…………..
25,000
Purchase discounts received ……..……………………
1,700
Invoice cost of purchases ……..
192,500
Purchase returns and allow. ……….………………….
4,000
Returns by customers …………..
2,100
Cost of sales transactions ………….……………….
196,000
Transportation-in ………………….
2,900
Shrinkage …………………………..……..……………………
800
Balance, Dec. 31, 2015
20,000
Cost of Goods Sold
Cost of sales transactions …….
Inventory shrinkage
recorded in December 31,
2015, adjusting entry …………..
196,000
800
Returns by customers and
restored to inventory ………………..…………
2,100
Balance, Dec. 31, 2015
194,700
Exercise 4-10 (20 minutes)
Perpetual
1)
Nov. 1 Merchandise Inventory ………………………………. 1,500
2)
Nov. 5 Accounts Payable …………………………..…………. 1,500
3)
Nov. 7 Cash …………………………..……………………………… 196
4)
Nov. 10 Merchandise Inventory ………………………………. 90
5)
Nov. 13 Accounts Receivable …………………………………. 1,600
Sales…………………………..………………………. 1,600
6)
Nov. 16 Sales Returns and Allowances …………………… 300
Accounts Receivable …………………………... 300
To record return of merchandise sold on credit.
Exercise 4-11 (25 minutes)
Adjusting entries
Dec. 31 Sales Salaries Expense …………………………….. 1,700
Salaries Payable ………………………………… 1,700
To record accrued salaries.
To close temporary accounts with
credit balances.
Dec. 31 Income Summary …………………………………… 444,750
Sales Returns and Allowances …………. 17,500
Sales Discounts ………………………………. 5,000