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CHAPTER 5 Accounting for Retail Businesses
5-21
Appendix 2 Ex. 5–45
Closing Entries
Dec.
31
Inventory
460,000
Estimated Returns Inventory
20,000
Sales
2,220,000
Purchases Discounts
35,000
Purchases Returns and Allowances
45,000
Inventory
375,000
Purchases
1,760,000
Freight In
17,000
Salaries Expense
375,000
Advertising Expense
36,000
Depreciation Expense
13,000
Miscellaneous Expense
9,000
Retained Earnings
195,000
31
Retained Earnings
65,000
Dividends
65,000
CHAPTER 5 Accounting for Retail Businesses
5-22
PROBLEMS
Prob. 5–1A
July
1
Inventory
20,500
Accounts Payable—Sabol Imports Co.
20,500
3
Inventory
11,835
Accounts Payable—Saxon Co.
11,835
{[$12,000 – ($12,000 2%)] + $75}.
5
Inventory
7,840
Accounts Payable—Schnee Co.
7,840
[$8,000 – ($8,000 2%)].
6
Accounts Payable—Schnee Co.
1,470
Inventory
1,470
[$1,500 – ($1,500 2%)].
13
Accounts Payable—Saxon Co.
11,835
Cash
11,835
14
Accounts Payable—Schnee Co.
6,370
Cash
6,370
($7,840 – $1,470).
19
Inventory
18,900
Accounts Payable—Southmont Co.
18,900
19
Inventory
140
Cash
140
20
Inventory
32,670
Accounts Payable—Stevens Co.
32,670
[$33,000 – ($33,000 1%)].
30
Accounts Payable—Stevens Co.
32,670
Cash
32,670
31
Accounts Payable—Sabol Imports Co.
20,500
Cash
20,500
31
Accounts Payable—Southmont Co.
18,900
Cash
18,900
CHAPTER 5 Accounting for Retail Businesses
5-23
Prob. 5–2A
Mar.
2
Accounts Receivable—Equinox Co.
18,711
Sales
18,711
[$18,900 – ($18,900 1%)].
2
Cost of Goods Sold
13,300
Inventory
13,300
3
Cash
12,031
Sales
11,350
Sales Tax Payable
681
3
Cost of Goods Sold
7,000
Inventory
7,000
4
Accounts Receivable—Empire Co.
55,400
Sales
55,400
4
Cost of Goods Sold
33,200
Inventory
33,200
5
Cash
31,800
Sales
30,000
Sales Tax Payable
1,800
5
Cost of Goods Sold
19,400
Inventory
19,400
12
Cash
18,711
Accounts Receivable—Equinox Co.
18,711
14
Cash
13,700
Sales
13,700
14
Cost of Goods Sold
8,350
Inventory
8,350
16
Accounts Receivable—Targhee Co.
27,225
Sales
27,225
[$27,500 – ($27,500 1%)].
16
Cost of Goods Sold
16,000
Inventory
16,000
CHAPTER 5 Accounting for Retail Businesses
5-24
Prob. 5–2A (Concluded)
Mar.
18
Customer Refunds Payable
4,752
Accounts Receivable—Targhee Co.
4,752
[$4,800 – ($4,800 1%)].
18
Inventory
2,900
Estimated Returns Inventory
2,900
19
Accounts Receivable—Vista Co.
8,085
Sales
8,085
[$8,250 – ($8,250 2%)].
19
Accounts Receivable—Vista Co.
75
Cash
75
19
Cost of Goods Sold
5,000
Inventory
5,000
26
Cash ($27,225 – $4,752)
22,473
Accounts Receivable—Targhee Co.
22,473
28
Cash ($8,085 + $75)
8,160
Accounts Receivable—Vista Co.
8,160
31
Cash
55,400
Accounts Receivable—Empire Co.
55,400
31
Delivery Expense
5,600
Cash
5,600
Apr.
3
Credit Card Expense
940
Cash
940
15
Sales Tax Payable
6,544
Cash
6,544
CHAPTER 5 Accounting for Retail Businesses
5-25
Prob. 5–3A
Nov.
3
Inventory
62,475
Accounts Payable—Moonlight Co.
62,475
{[$85,000 – ($85,000 25%)] = $63,750;
[$63,750 – ($63,750 2%)]}.
4
Cash
37,680
Sales
37,680
4
Cost of Goods Sold
22,600
Inventory
22,600
5
Inventory
47,360
Accounts Payable—Papoose Creek Co.
47,360
[$47,500 – ($47,500 2%) + $810].
6
Accounts Payable—Moonlight Co.
13,230
Inventory
13,230
[$13,500 – ($13,500 2%)].
8
Accounts Receivable—Quinn Co.
15,600
Sales
15,600
8
Cost of Goods Sold
9,400
Inventory
9,400
13
Accounts Payable—Moonlight Co.
49,245
Cash
49,245
($62,475 – $13,230).
14
Cash
236,000
Sales
236,000
14
Cost of Goods Sold
140,000
Inventory
140,000
15
Accounts Payable—Papoose Creek Co.
47,360
Cash
47,360
23
Cash
15,600
Accounts Receivable—Quinn Co.
15,600
CHAPTER 5 Accounting for Retail Businesses
5-26
Prob. 5–3A (Concluded)
Nov.
24
Accounts Receivable—Rabel Co.
56,331
Sales
56,331
[$56,900 – ($56,900 1%)].
24
Cost of Goods Sold
34,000
Inventory
34,000
28
Credit Card Expense
3,540
Cash
3,540
30
Customers Refunds Payable
6,000
Cash
6,000
30
Inventory
3,300
Estimated Returns Inventory
3,300
CHAPTER 5 Accounting for Retail Businesses
5-27
Prob. 5–4A
1.
Aug.
1
Accounts Receivable—Beartooth Co.
47,040
Sales [$48,000 – ($48,000 2%)]
47,040
1
Cost of Goods Sold
28,800
Inventory
28,800
2
Delivery Expense
1,150
Cash
1,150
5
Accounts Receivable—Beartooth Co.
66,000
Sales
66,000
5
Cost of Goods Sold
40,000
Inventory
40,000
15
Accounts Receivable—Beartooth Co.
58,700
Sales
58,700
15
Accounts Receivable—Beartooth Co.
1,675
Cash
1,675
15
Cost of Goods Sold
35,000
Inventory
35,000
16
Cash
47,040
Accounts Receivable—Beartooth Co.
47,040
20
Customer Refunds Payable
1,000
Cash
1,000
31
Cash
66,000
Accounts Receivable—Beartooth Co.
66,000
31
Customer Refunds Payable
4,000
Accounts Receivable—Beartooth Co.
4,000
31
Inventory
2,500
Estimated Returns Inventory
2,500
CHAPTER 5 Accounting for Retail Businesses
5-28
Prob. 5–4A (Concluded)
2.
Aug.
1
Inventory
47,040
Accounts Payable—Summit Company
47,040
5
Inventory
66,000
Accounts Payable—Summit Company
66,000
9
Inventory
2,300
Cash
2,300
15
Inventory ($58,700 + $1,675)
60,375
Accounts Payable—Summit Company
60,375
16
Accounts Payable—Summit Company
47,040
Cash
47,040
20
Cash
1,000
Inventory
1,000
31
Accounts Payable—Summit Company
66,000
Cash
66,000
31
Accounts Payable—Summit Company
4,000
Inventory
4,000
CHAPTER 5 Accounting for Retail Businesses
5-29
Prob. 5–5A
1.
Clairemont Co.
Income Statement
For the Year Ended May 31, 20Y2
Sales
$ 11,343,000
Cost of goods sold
(7,850,000)
Gross profit
$ 3,493,000
Expenses:
Selling expenses:
Sales salaries expense
$916,000
Advertising expense
550,000
Depreciation expense—store
equipment
140,000
Miscellaneous selling expense
38,000
Total selling expenses
$1,644,000
Administrative expenses:
Office salaries expense
$650,000
Rent expense
94,000
Depreciation expense—office
equipment
50,000
Insurance expense
48,000
Office supplies expense
28,100
Miscellaneous administrative
expense
14,500
Total administrative expenses
884,600
Total operating expenses
(2,528,600)
Operating income
$ 964,400
Other revenue and expense:
Interest expense
(21,000)
Net income
$ 943,400
2.
Clairemont Co.
Statement of Stockholders’ Equity
For the Year Ended May 31, 20Y2
Common
Retained
Stock
Earnings
Total
Balances, June 1, 20Y1
$425,000
$2,949,100
$3,374,100
Issued common stock
75,000
75,000
Net income
943,400
943,400
Dividends
(100,000)
(100,000)
Balances, May 31, 20Y2
$500,000
$3,792,500
$4,292,500
CHAPTER 5 Accounting for Retail Businesses
5-30
Prob. 5–5A (Concluded)
3.
Clairemont Co.
Balance Sheet
May 31, 20Y2
Assets
Current assets:
Cash
$ 240,000
Accounts receivable
966,000
Inventory
1,690,000
Estimated returns inventory
22,500
Office supplies
13,500
Prepaid insurance
8,000
Total current assets
$ 2,940,000
Property, plant, and equipment:
Office equipment
$ 830,000
Accum. depreciation—office equipment
(550,000)
Book value—office equipment
$ 280,000
Store equipment
$ 3,600,000
Accum. depreciation—store equipment
(1,820,000)
Book value—store equipment
1,780,000
Total property, plant, and
equipment
2,060,000
Total assets
$ 5,000,000
Liabilities
Current liabilities:
Accounts payable
$ 326,000
Salaries payable
41,500
Customer refunds payable
40,000
Note payable (current portion)
50,000
Total current liabilities
$ 457,500
Long-term liabilities:
Note payable (long-term portion)
250,000
Total liabilities
$ 707,500
Stockholders’ Equity
Common stock
$ 500,000
Retained earnings
3,792,500
Total stockholders’ equity
4,292,500
Total liabilities and stockholders’ equity
$ 5,000,000
4. The multiple-step form of income statement contains various sections for revenues and
CHAPTER 5 Accounting for Retail Businesses
5-31
Prob. 5–6A
1.
Clairemont Co.
Income Statement
For the Year Ended May 31, 20Y2
Sales
$ 11,343,000
Expenses:
Cost of goods sold
$7,850,000
Selling expenses
1,644,000
Administrative expenses
884,600
Interest expense
21,000
Total expenses
(10,399,600)
Net income
$ 943,400
2.
Clairemont Co.
Statement of Stockholders’
Equity For the Year Ended May 31, 20Y2
Common
Stock
Retained
Earnings
Total
Balances, June 1, 20Y1
$425,000
$2,949,100
$3,374,100
Issued common stock
75,000
75,000
Net income
943,400
943,400
Dividends
(100,000)
(100,000)
Balances, May 31, 20Y2
$500,000
$3,792,500
$4,292,500
CHAPTER 5 Accounting for Retail Businesses
5-32
Prob. 5–6A (Continued)
3.
Clairemont Co.
Balance Sheet
May 31, 20Y2
Assets
Current assets:
Cash
$ 240,000
Accounts receivable
966,000
Inventory
1,690,000
Estimated returns inventory
22,500
Office supplies
13,500
Prepaid insurance
8,000
Total current assets
$ 2,940,000
Property, plant, and equipment:
Office equipment
$ 830,000
Accum. depreciation—office equipment
(550,000)
Book value—office equipment
$ 280,000
Store equipment
$ 3,600,000
Accum. depreciation—store equipment
(1,820,000)
Book value—store equipment
1,780,000
Total property, plant, and
equipment
2,060,000
Total assets
$ 5,000,000
Liabilities
Current liabilities:
Accounts payable
$ 326,000
Salaries payable
41,500
Customer refunds payable
40,000
Note payable (current portion)
50,000
Total current liabilities
$ 457,500
Long-term liabilities:
Note payable (long-term portion)
250,000
Total liabilities
$ 707,500
Stockholders’ Equity
Common stock
$ 500,000
Retained earnings
3,792,500
Total stockholders’ equity
4,292,500
Total liabilities and stockholders’ equity
$ 5,000,000
CHAPTER 5 Accounting for Retail Businesses
5-33
Prob. 5–6A (Concluded)
4.
20Y2
Closing Entries
May
31
Sales
11,343,000
Cost of Goods Sold
7,850,000
Sales Salaries Expense
916,000
Advertising Expense
550,000
Depreciation Expense—Store Equipment
140,000
Miscellaneous Selling Expense
38,000
Office Salaries Expense
650,000
Rent Expense
94,000
Depreciation Expense—Office Equipment
50,000
Insurance Expense
48,000
Office Supplies Expense
28,100
Miscellaneous Administrative Expense
14,500
Interest Expense
21,000
Retained Earnings
943,400
31
Retained Earnings
100,000
Dividends
100,000
CHAPTER 5 Accounting for Retail Businesses
5-34
Appendix 2 Prob. 5–7A
July
1
Purchases
20,500
Accounts Payable—Sabol Imports Co.
20,500
3
Purchases
12,000
Freight In
75
Accounts Payable—Saxon Co.
12,075
4
Purchases
8,000
Accounts Payable—Schnee Co.
8,000
6
Accounts Payable—Schnee Co.
1,500
Purchases Returns and Allowances
1,500
13
Accounts Payable—Saxon Co.
12,075
Cash
11,835
Purchases Discounts
240
14
Accounts Payable—Schnee Co.
6,500
Cash
6,370
Purchases Discounts
130
19
Purchases
18,900
Accounts Payable—Southmont Co.
18,900
19
Freight In
140
Cash
140
20
Purchases
33,000
Accounts Payable—Stevens Co.
33,000
30
Accounts Payable—Stevens Co.
33,000
Cash
32,670
Purchases Discounts
330
31
Accounts Payable—Sabol Imports Co.
20,500
Cash
20,500
31
Accounts Payable—Southmont Co.
18,900
Cash
18,900
CHAPTER 5 Accounting for Retail Businesses
5-35
Appendix 2 Prob. 5–8A
Nov.
3
Purchases
63,750
Accounts Payable—Moonlight Co.
63,750
[$85,000 – ($85,000 25%)].
4
Cash
37,680
Sales
37,680
5
Purchases
47,500
Freight In
810
Accounts Payable—Papoose Creek Co.
48,310
6
Accounts Payable—Moonlight Co.
13,500
Purchases Returns and Allowances
13,500
8
Accounts Receivable—Quinn Co.
15,600
Sales
15,600
13
Accounts Payable—Moonlight Co.
50,250
Cash
49,245
Purchases Discounts
1,005
14
Cash
236,000
Sales
236,000
15
Accounts Payable—Papoose Creek Co.
48,310
Cash
47,360
Purchases Discounts
950
23
Cash
15,600
Accounts Receivable—Quinn Co.
15,600
24
Accounts Receivable—Rabel Co.
56,331
Sales
56,331
[$56,900 – ($56,900 1%)].
28
Credit Card Expense
3,540
Cash
3,540
30
Customers Refunds Payable
6,000
Cash
6,000
CHAPTER 5 Accounting for Retail Businesses
5-36
Appendix 2 Prob. 5–9A
1.
Aug.
1
Accounts Receivable—Beartooth Co.
47,040
Sales
47,040
[$48,000 – ($48,000 2%)].
2
Delivery Expense
1,150
Cash
1,150
5
Accounts Receivable—Beartooth Co.
66,000
Sales
66,000
15
Accounts Receivable—Beartooth Co.
58,700
Sales
58,700
15
Accounts Receivable—Beartooth Co.
1,675
Cash
1,675
16
Cash
47,040
Accounts Receivable—Beartooth Co.
47,040
20
Customer Refunds Payable
1,000
Cash
1,000
31
Cash
66,000
Accounts Receivable—Beartooth Co.
66,000
31
Customer Refunds Payable
4,000
Accounts Receivable—Beartooth Co.
4,000
31
Inventory
2,500
Estimated Returns Inventory
2,500
5-37
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix 2 Prob. 5–9A (Concluded)
2.
Aug.
1
Purchases
48,000
Accounts Payable—Summit Company
48,000
5
Purchases
66,000
Accounts Payable—Summit Company
66,000
9
Freight In
2,300
Cash
2,300
15
Purchases
58,700
Freight In
1,675
Accounts Payable—Summit Company
60,375
16
Accounts Payable—Summit Company
48,000
Cash
47,040
Purchases Discounts
960
20
Cash
1,000
Purchases Returns and Allowances
1,000
31
Accounts Payable—Summit Company
66,000
Cash
66,000
31
Accounts Payable—Summit Company
4,000
Purchases Returns and Allowances
4,000
Appendix 2 Prob. 5–10A
1. Periodic inventory system. Wyman Company uses a periodic inventory system
CHAPTER 5 Accounting for Retail Businesses
5-38
Appendix 2 Prob. 5–10A (Continued)
2.
Wyman Company
Income Statement
For the Year Ended December 31, 20Y5
Sales
$ 3,280,000
Cost of goods sold:
Inventory, January 1, 20Y5
$ 257,000
Cost of merchandise purchased:
Purchases
$2,650,000
Purchases returns and allowances
(93,000)
Purchases discounts
(37,000)
Freight in
48,000
Total cost of merchandise purchased
2,568,000
Inventory available for sale
$2,825,000
Inventory, December 31, 20Y5
(305,000)
Cost of goods sold before estimated returns
$2,520,000
Increase in estimated returns inventory
(5,000)
Cost of goods sold
(2,515,000)
Gross profit
$ 765,000
Expenses:
Selling expenses:
Sales salaries expense
$ 300,000
Advertising expense
45,000
Delivery expense
9,000
Depreciation expense—store equipment
6,000
Miscellaneous selling expense
12,000
Total selling expenses
$ 372,000
Administrative expenses:
Office salaries expense
$ 175,000
Rent expense
28,000
Insurance expense
3,000
Office supplies expense
2,000
Depreciation expense—office equipment
1,500
Miscellaneous administrative expense
3,500
Total administrative expenses
213,000
Total operating expenses
(585,000)
Operating income
$ 180,000
Other revenue and expense:
Rent revenue
$ 7,000
Interest expense
(2,000)
5,000
Net income
$ 185,000
CHAPTER 5 Accounting for Retail Businesses
5-39
Appendix 2 Prob. 5–10A (Concluded)
3.
Closing Entries
Dec.
31
Inventory
305,000
Estimated Returns Inventory
5,000
Sales
3,280,000
Purchases Returns and Allowances
93,000
Purchases Discounts
37,000
Rent Revenue
7,000
Inventory
257,000
Purchases
2,650,000
Freight In
48,000
Sales Salaries Expense
300,000
Advertising Expense
45,000
Delivery Expense
9,000
Depreciation Expense—Store Equipment
6,000
Miscellaneous Selling Expense
12,000
Office Salaries Expense
175,000
Rent Expense
28,000
Insurance Expense
3,000
Office Supplies Expense
2,000
Depreciation Expense—Office Equipment
1,500
Miscellaneous Administrative Expense
3,500
Interest Expense
2,000
Retained Earnings
185,000
Retained Earnings
25,000
Dividends
25,000
4. $185,000. The same net income as under the periodic inventory system.
CHAPTER 5 Accounting for Retail Businesses
Prob. 5–1B
Mar.
1
Inventory
43,035
Accounts Payable—Haas Co.
43,035
{[$43,250 – ($43,250 2%)] + $650}.
5
Inventory
19,175
Accounts Payable—Whitman Co.
19,175
10
Accounts Payable—Haas Co.
43,035
Cash
43,035
13
Inventory
15,239
Accounts Payable—Jost Co.
15,239
[$15,550 – ($15,550 2%)].
14
Accounts Payable—Jost Co.
3,675
Inventory
3,675
[$3,750 – ($3,750 2%)].
18
Inventory
13,560
Accounts Payable—Fairhurst Company
13,560
18
Inventory
140
Cash
140
19
Inventory
6,370
Accounts Payable—Bickle Co.
6,370
[$6,500 – ($6,500 2%)].
23
Accounts Payable—Jost Co. ($15,239 – $3,675)
11,564
Cash
11,564
29
Accounts Payable—Bickle Co.
6,370
Cash
6,370
31
Accounts Payable—Fairhurst Company
13,560
Cash
13,560
31
Accounts Payable—Whitman Co.
19,175
Cash
19,175
