CHAPTER 5
Accounting for Merchandising Operations
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
B
Problems
*1. Identify the differences
between service and
merchandising companies.
2, 3, 4
1
*2. Explain the recording
of purchases under a
perpetual inventory
system.
5, 6, 7, 8
2, 4
1
1A, 2A, 4A
1B, 2B, 4B
*3. Explain the recording
of sales revenues under
a perpetual inventory
system.
9, 10, 11
2, 3
2
1A, 2A, 4A
1B, 2B, 4B
*4. Explain the steps in the
accounting cycle for a
merchandising company.
1, 12,
13, 14
5, 6
3
3A, 4A, 5A
3B, 4B
*5. Distinguish between a
multiple-step and a single-
step income statement.
15, 16,
17, 18,
19, 20
7, 8, 9
4
2A, 3A, 5A
6A, 7A
2B, 3B
5B, 6B
*6. Prepare a worksheet for
a merchandising company
21
10
5A
*7. Explain the recording of
purchases and sales of
inventory under a periodic
inventory system.
22, 23
11, 12, 13,
14, 15
6A, 7A, 8A
5B, 6B, 7B
chapter.
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Journalize purchase and sales transactions under
a perpetual inventory system.
Simple
20–30
2A
Journalize, post, and prepare a partial income statement.
Simple
30–40
3A
Prepare financial statements and adjusting and
closing entries.
Moderate
40–50
4A
Journalize, post, and prepare a trial balance.
Simple
30–40
*5A
Complete accounting cycle beginning with a worksheet.
Moderate
50–60
*6A
Determine cost of goods sold and gross profit under
periodic approach.
Moderate
40–50
*7A
Calculate missing amounts and assess profitability.
Moderate
20–30
*8A
Journalize, post, and prepare trial balance and partial
income statement using periodic approach.
Simple
30–40
1B
Journalize purchase and sales transactions under
a perpetual inventory system.
Simple
20–30
2B
Journalize, post, and prepare a partial income statement.
Simple
30–40
3B
Prepare financial statements and adjusting and
closing entries.
Moderate
40–50
4B
Journalize, post, and prepare a trial balance.
Simple
30–40
*5B
Determine cost of goods sold and gross profit under
periodic approach.
Moderate
40–50
*6B
Calculate missing amounts and assess profitability.
Moderate
20–30
*7B
Journalize, post, and prepare trial balance and partial
income statement using periodic approach.
Simple
30–40
WEYGANDT FINANCIAL ACCOUNTING 9E
CHAPTER 5
ACCOUNTING FOR MERCHANDISING OPERATIONS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
AP
Simple
4–6
BE2
2, 3
AP
Simple
2–4
BE3
3
AP
Simple
6–8
BE4
2
AP
Simple
6–8
BE5
4
AP
Simple
1–2
BE6
4
AP
Simple
2–4
BE7
5
AP
Simple
2–4
BE8
5
C
Simple
4–6
BE9
5
AP
Simple
4–6
BE10
6
K
Simple
2–4
BE11
7
AP
Simple
4–6
BE12
7
AP
Simple
4–6
BE13
7
AP
Simple
3–5
BE14
7
AP
Simple
6–8
BE15
7
AP
Simple
4–6
DI1
2
AP
Simple
2–4
DI2
3
AP
Simple
4–6
DI3
4
AP
Simple
4–6
DI4
5
AP
Simple
10–12
EX1
1
C
Simple
3–5
EX2
2
AP
Simple
8–10
EX3
2, 3
AP
Simple
8–10
EX4
2, 3
AP
Simple
8–10
EX5
3
AP
Simple
8–10
EX6
4, 5
AP
Simple
6–8
EX7
4
AP
Simple
6–8
EX8
4
AP
Simple
8–10
EX9
5
AP
Simple
8–10
EX10
5
AP
Simple
8–10
EX11
2, 3
AN
Moderate
6–8
EX12
5
AP
Simple
8–10
EX13
5
AN
Simple
6–8
ACCOUNTING FOR MERCHANDISING OPERATIONS (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX14
5
AN
Moderate
8–10
EX15
6
AP
Simple
2–4
EX16
6
AP
Simple
8–10
EX17
7
AP
Simple
6–8
EX18
7
AP
Simple
8–10
EX19
7
AN
Moderate
10–12
EX20
7
AP
Simple
8–10
EX21
7
AP
Simple
8–10
EX22
7
AP
Simple
6–8
P1A
2, 3
AP
Simple
20–30
P2A
2, 3, 5
AP
Simple
30–40
P3A
4, 5
AN
Moderate
40–50
P4A
2–4
AP
Simple
30–40
P5A
4–6
AP
Moderate
50–60
P6A
5, 7
AP
Moderate
40–50
P7A
5, 7
AN
Moderate
20–30
P8A
7
AP
Simple
30–40
P1B
2, 3
AP
Simple
20–30
P2B
2, 3, 5
AP
Simple
30–40
P3B
4, 5
AN
Moderate
40–50
P4B
2–4
AP
Simple
30–40
P5B
5, 7
AP
Moderate
40–50
P6B
5, 7
AN
Moderate
20–30
P7B
7
AP
Simple
30–40
BYP1
5
AN, E
Simple
10–15
BYP2
5
AN, E
Simple
15–20
BYP3
5
AN, E
Simple
15–20
BYP4
—
AP
Simple
10–15
BYP5
5
AN, S, E
Moderate
20–30
BYP6
3
C
Simple
10–15
BYP7
2
E
Simple
10–15
BYP8
—
E
Simple
5–10
BYP9
—
AP
Moderate
10–15
BLOOM’S TAXONOMY TABLE
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 5-5
Evaluation
1. Identify the differences
between service and
merchandising companies.
Q5-2
Q5-3
Q5-4
E5-1
BE5-1
2. Explain the recording of
purchases under a perpetual
inventory system.
Q5-5
Q5-6
Q5-7
Q5-8
BE5-2
BE5-4
DI5-1
E5-2
E5-3
E5-4
P5–1A
P5–2A
P5–1B
P5–2B
P5–4A
P5–4B
E5–11
3. Explain the recording of
sales revenues under a
perpetual inventory system.
Q5–10
Q5–11
BE5-2
BE5-3
DI5-2
E5-3
E5-4
E5-5
P5–1A
P5–2A
P5–4A
P5–1B
P5–2B
P5–4B
Q5-9
E5–11
4. Explain the steps in the
accounting cycle for a
merchandising company.
Q5-1
Q5–12
Q5–14
Q5–13
BE5-5
BE5-6
DI5-3
E5-6
E5-7
E5-8
P5–4A
P5–5A
P5–4B
P5–3A
P5–3B
5. Distinguish between a
multiple-step and a single-
step income statement.
Q5–18
Q5–19
BE5-8
Q5–17
BE5-7
BE5-9
DI5-4
E5-6
E5-9
E5–10
E5–12
P5–2A
P5–5A
P5–6A
P5–2B
P5–5B
Q5–15
Q5–16
Q5–20
E5–13
E5–14
P5–3A
P5–7A
P5–3B
P5–6B
*6. Prepare a worksheet for
a merchandising company.
Q5–21
BE5-10
E5–15
E5–16
P5–5A
*7. Explain the recording of
purchases and sales under
a periodic inventory system.
Q5–22
Q5–23
BE5–11
BE5-12
BE5-13
BE5-14
BE5-15
E5–17
E5–18
E5–20
E5–21
E5–22
P5–6A
P5–8A
P5–5B
P5–7B
E5–19
P5–7A
P5–6B
Broadening Your Perspective
Communication
Real-World Focus
FASB Codification
Financial Reporting
Comparative Analysis
Decision Making Across
the Organization
Decision Making
Across the
Organization
All About You
Comparative Analysis
Financial Reporting
Decision Making Across
the Organization
Ethics Case
ANSWERS TO QUESTIONS
1. (a) Disagree. The steps in the accounting cycle are the same for both a merchandising company
and a service company.
2. The normal operating cycle for a merchandising company is likely to be longer than in a service
collected.
3. (a) The components of revenues and expenses differ as follows:
Merchandising
Service
Revenues
Expenses
Sales Revenue
Cost of Goods Sold and Operating
Fees, Rents, etc.
Operating (only)
Sales
Revenue
Less
Cost of
Goods
Sold
Equals
Gross
Profit
Less
Operating
Expenses
Equals
Net
Income
4. Income measurement for a merchandising company differs from a service company as follows:
6. The letters FOB mean Free on Board. FOB shipping point means that goods are placed free on
7. Credit terms of 2/10, n/30 mean that a 2% cash discount may be taken if payment is made within
invoice date.
8. July 24 Accounts Payable ($2,000 – $200) ……………………………………….. 1,800
9. Agree. In accordance with the revenue recognition principle, sales revenues are generally con–
10. (a) The primary source documents are: (1) cash sales—cash register tapes and (2) credit sales—
sales invoice.
Questions Chapter 5 (Continued)
(b) The entries are:
Debit
Credit
Cash sales—
Cash ……………………………………………………..
Sales Revenue ………………………………..
Cost of Goods Sold …………………………………
Inventory …………………………………………
XX
XX
XX
XX
Credit sales—
Accounts Receivable ……………………………….
Sales Revenue ………………………………..
Cost of Goods Sold …………………………………
Inventory …………………………………………
XX
XX
XX
XX
11. July 19 Cash ($800 – $16) ……………………………………………………… 784
12. The perpetual inventory records for merchandise inventory may be incorrect due to a variety of
13. Two closing entries are required:
(1) Sales Revenue …………………………………………………………………… 200,000
Income Summary …………………………………………………………. 200,000
(2) Income Summary ………………………………………………………………… 145,000
Cost of Goods Sold ………………………………………………………. 145,000
15. Sales revenues ………………………………………………………………………………………… $105,000
16. Gross profit ……………………………………………………………………………………………… $370,000
17. There are three distinguishing features in the income statement of a merchandising company:
(1) a sales revenues section, (2) a cost of goods sold section, and (3) gross profit.
Questions Chapter 5 (Continued)
*18. (a) The operating activities part of the income statement has three sections: sales revenues,
*19. The single-step income statement differs from the multiple-step income statement in that: (1) all data
20. Apple’s gross profit rate for 2011 was 40.5% [($108,249 – $64,431) ÷ $108,249]. Its gross profit
to 2011.
*21. The columns are:
(a) Inventory—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Balance
Sheet (Dr.).
(b) Cost of Goods Sold—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Income
Statement (Dr.).
*22.
Accounts
Added/Deducted
Purchase Returns and Allowances
Purchase Discounts
Freight-In
Deducted
Deducted
Added
*23. July 24 Accounts Payable ($3,000 – $200) …………………………………………… 2,800
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 5-1
(a) Cost of goods sold = $45,000 ($75,000 – $30,000).
Operating expenses = $19,200 ($30,000 – $10,800).
(b) Gross profit = $38,000 ($108,000 – $70,000).
BRIEF EXERCISE 5-2
Radomir Company
Inventory ……………………………………………………. 780
Lemke Company
Accounts Receivable …………………………………… 780
BRIEF EXERCISE 5-3
(a) Accounts Receivable …………………………………… 900,000
Sales Revenue ……………………………………… 900,000
(b) Sales Returns and Allowances …………………….. 90,000
BRIEF EXERCISE 5-3 (Continued)
(c) Cash ($810,000 – $16,200) ……………………………. 793,800
Sales Discounts ($810,000 X 2%) ………………….. 16,200
Accounts Receivable ……………………………. 810,000
($900,000 – $90,000)
BRIEF EXERCISE 5-4
(a) Inventory ……………………………………………………. 900,000
(b) Accounts Payable ……………………………………….. 90,000
(c) Accounts Payable ($900,000 – $90,000) ………… 810,000
Inventory
BRIEF EXERCISE 5-5
Cost of Goods Sold …………………………..……………….. 2,300
BRIEF EXERCISE 5-6
Sales Revenue …………………………………………………… 195,000
Income Summary ………………………………………………. 119,000