35 Minutes, Medium
Nov. 5 13,390
Sales 13,390
9 3,800
Accounts Pa
y
able
(
Owatonna Tool Co.
)
3,800
b.
1,024,900$
SOLUTIONS TO PROBLEMS SET
A
Partial Income Statement
For the Year Ended December 31, 20__
Net sales
PROBLEM 6.1
A
a.
CLAYPOOL HARDWARE
(1)
General Journal
CLAYPOOL HARDWAR
E
Purchased merchandise on credit.
Accounts receivable (Bemidji Construction)
Sold merchandise on account.
To record the cost of goods sold relating to the
sales of merchandise to Bemidji Construction.
Inventory
c.
Claypool Industry
Hardware Average Difference
Claypool earned a gross profit rate of 32%, which is significantly higher than the industry
average. Claypool’s sales were above the industry average, and it earned $77,968 more gross
profit than the “average” store of its size. This higher gross profit was earned even though
its cost of goods sold was $18,000 to $20,000 higher than the industry average because of the
additional transportation charges.
To have a higher-than-average cost of goods sold and still earn a much larger-than-
average amount of gross profit, Claypool must be able to charge substantially higher
sales prices than most hardware stores. Presumably, the company could not charge such
prices in a highly competitive environment. Thus, the remote location appears to
insulate it from competition and allow it to operate more profitably than hardware stores
with nearby competitors.
PROBLEM 6.1
A
CLAYPOOL HARDWARE (concluded
)
Claypool seems quite able to pass its extra transportation costs on to its customers and, in
fact, enjoys a significant financial benefit from its remote location. The following data
support these conclusions:
a.
250$
4,120 520
PROBLEM 6.2
A
HENDRY’S BOUTIQUE
HENDRY’S BOUTIQUE
For the Year Ended December 31, 2015
Income Statement
15 Minutes, Easy
Cost of goods sold
Gross profit
Utilities expense
Other expenses:
Purchase discounts lost
201
5-
2016
2014
–
201
5
1. 6% (1) 8% (2)
2. (1.1%) (3) (2.7%) (4)
PROBLEM 6.3A
KNAUSS SUPERMARKETS
20 Minutes, Medium
a.
Change in net sales …………………….
Change in net sales per square foot ….
30 Minutes, Medium
Date
(1)
A
p
ril 10 5,880
Accounts Pa
y
able
(
Polar Co.
)
5,880
p
y
(
)
Made payment after discount period had expired.
PROBLEM 6.4
A
a.
General Journal
KITCHEN ELECTRICS
$588 per unit ($600, less 2%).
Inventory
To record purchase of 10 refrigerators at net cost of
PROBLEM 6.4
A
KITCHEN ELECTRICS (concluded)
30 Minutes, Strong
a. Journal entries by Siogo Shoes:
Feb . 9 10,000
Sales 10,000
PROBLEM 6.5
A
SIOGO SHOES AND SOLE MATES
Accounts Receivable (Sole Mates)
Sold merchandise on account; terms, 1/10, n/30.
General Journal
To record cost of merchandise sold (100 pr. X $60/pr.).
c.
PROBLEM 6.5
A
General Journal
SIOGO SHOES AND SOLE MATES (concluded)
Yes. Sole Mates should take advantage of 1/10, n/30 purchase discounts, even if it must
Siogo Shoes ($9,900 – $990 = $8,910).
60 Minutes, Strong
a.
Entries that Should Have Been Recorded by the Accounting Clerk
Jan. 10 Accounts Payable……………………………….. 9,800
Cash……………………………………. 9,800
PROBLEM 6.6
A
KING 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 Recorded by the Accounting Clerk
Payment for books received on December 15th of
prior year.
d.
e.
PROBLEM 6.6
A
KING ENTERPRISES (concluded)
The journal entry to correct the accounting clerk’s errors is (assuming that King’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
Kin
g
‘s books have been closed for the
y
ear
)
is:
c.
The journal entry to correct the accounting clerk’s errors is (assuming that King’s books
have been closed for the year).