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S5-7 Journalizing purchase and sales transactions
Learning Objectives 2, 3
On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin
Wholesalers, $12,000, that cost $4,800. Terms 3/10, n/30. On November 5, 2018, Tarin
Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on
November 13, 2018.
Requirements
1. Journalize Tarin Wholesaler’s November transactions.
2. Journalize Cain Company’s November transactions.
SOLUTION
Requirement 1
S5-8 Adjusting for inventory shrinkage
Learning Objective 4
Jeana’s Furniture’s unadjusted Merchandise Inventory account at year-end is $69,000. The
physical count of inventory came up with a total of $67,600. Journalize the adjusting entry
needed to account for inventory shrinkage.
SOLUTION
S5-9 Journalizing closing entries
Learning Objective 4
Rocky RV Center’s accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold $ 372,000 Accumulated Depreciation—Building $ 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense—Building 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
SOLUTION
Requirement 1
Use the following information to answer Short Exercises S5-10 and S5-11.
Camilia Communications reported the following figures from its adjusted trial balance for its
first year of business, which ended on July 31, 2018:
Cash $ 2,900 Cost of Goods Sold $ 18,700
Selling Expenses 1,400 Equipment, net 9,500
Accounts Payable 4,300 Accrued Liabilities 1,800
Common Stock 4,365 Net Sales Revenue 29,200
Notes Payable, long-term 500 Accounts Receivable 3,200
Merchandise Inventory 1,100 Interest Expense 65
Administrative Expenses 3,300
S5-10 Preparing a merchandiser’s income statement
Learning Objective 5
Prepare Camilia Communications’s multi-step income statement for the year ended July 31,
2018.
SOLUTION
S5-11 Preparing a merchandiser’s statement of retained earnings and balance sheet
Learning Objective 5
Requirements
1. Prepare Camilia Communications’s statement of retained earnings for the year ended July 31,
2018. Assume that there were no dividends declared during the year and that the business
began on August 1, 2017.
2. Prepare Camilia Communications’s classified balance sheet at July 31, 2018. Use the report
format.
SOLUTION
Requirement 1
S5-12 Computing the gross profit percentage
Learning Objective 6
Macarthy Landscape Supply’s selected accounts as of December 31, 2018, follow. Compute the
gross profit percentage for 2018.
Selling Expenses $ 12,900
Interest Revenue 900
Net Sales Revenue 134,700
Cost of Goods Sold 114,000
Administrative Expenses 10,200
SOLUTION
S5A-13 Journalizing multiple performance obligations
Learning Objective 7 Appendix 5A
Journalize the following sales transactions for King Company. Explanations are not required.
Apr. 1 King Company sold merchandise inventory for $150. The cost of the inventory was
$90. The customer paid cash. King Company was running a promotion and the
customer received a $20 award at the time of sale that can be used at a future date on
any King Company merchandise.
May 15 The customer uses the $20 award when purchasing merchandise inventory for $30. The
cost of the inventory was $18. The customer paid cash.
SOLUTION
S5A-13, cont.
15 Cost of Goods Sold 18
Merchandise Inventory 18
S5B-14 Journalizing purchase transactions—periodic inventory system
Learning Objective 8 Appendix 5B
Consider the following transactions for Garman Packing Supplies:
Apr. 10 Garman Packing Supplies buys $175,000 worth of merchandise inventory on account with
credit terms of 1/10, n/30.
12 Garman returns $15,200 of the merchandise to the vendor due to damage during shipment.
19 Garman paid the amount due, less the return and discount.
Requirements
1. Journalize the purchase transactions assuming Garman Packing Supplies uses the periodic
inventory system. Explanations are not required.
2. What is the amount of net purchases?
SOLUTION
Requirement 1
S5B-15 Journalizing sales transactions—periodic inventory system
Learning Objective 8 Appendix 5B
Journalize the following sales transactions for Sanborn Camera Store using the periodic
inventory system. Explanations are not required.
Dec. 3 Sanborn sold $41,900 of camera equipment on account, credit terms are 3/15, n/EOM.
17 Sanborn receives payment from the customer on the amount due less the discount.
SOLUTION
S5B-16 Journalizing closing entries—periodic inventory system
Learning Objective 8 Appendix 5B
D & T Printing Supplies’s accounting records include the following accounts at December 31,
2018.
Purchases $ 185,200 Accumulated Depreciation—Building $ 21,000
Accounts Payable 7,700 Cash 18,100
Rent Expense 8,600 Sales Revenue 257,800
Building 42,800 Depreciation Expense—Building 4,700
Common Stock 55,000 Dividends 26,500
Retained Earnings 30,400 Interest Expense 1,900
Merchandise Inventory, Beginning 119,000 Merchandise Inventory, Ending 102,100
Notes Payable 11,300 Purchase Returns and Allowances 20,700
Purchase Discounts 2,900
Requirements
1. Journalize the required closing entries for D & T Printing Supplies assuming that D & T uses
the periodic inventory system.
2. Determine the ending balance in the Retained Earnings account.
SOLUTION
Requirement 1
S5B-17 Computing cost of goods sold in a periodic inventory system
Learning Objective 8 Appendix 5B
M Wholesale Company began the year with merchandise inventory of $5,000. During the year,
M purchased $93,000 of goods and returned $6,600 due to damage. M also paid freight charges
of $1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood
at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold
for the year.
SOLUTION
