CHAPTER 5 Accounting for Retail Businesses
5–41
Prob. 5–2B
July
1
Accounts Receivable—Landscapes Co.
33,450
Sales
33,450
1
Cost of Goods Sold
20,000
Inventory
20,000
2
Cash
92,880
Sales
86,000
Sales Tax Payable ($86,000 8%)
6,880
2
Cost of Goods Sold
51,600
Inventory
51,600
5
Accounts Receivable—Peacock Company
17,325
Sales
17,325
[$17,500 – ($17,500 1%)].
5
Cost of Goods Sold
10,000
Inventory
10,000
8
Cash
120,960
Sales
112,000
Sales Tax Payable ($112,000 8%)
8,960
8
Cost of Goods Sold
67,200
Inventory
67,200
13
Cash
96,000
Sales
96,000
13
Cost of Goods Sold
57,600
Inventory
57,600
14
Accounts Receivable—Loeb Co.
15,840
Sales
15,840
[$16,000 – ($16,000 1%)].
14
Cost of Goods Sold
9,000
Inventory
9,000
15
Cash
17,325
Accounts Receivable—Peacock Company
17,325
CHAPTER 5 Accounting for Retail Businesses
5–42
Prob. 5–2B (Concluded)
July
16
Customer Refunds Payable
Accounts Receivable—Loeb Co.
2,970
[$3,000 – ($3,000 1%)].
16
Inventory
Estimated Returns Inventory
1,800
18
Accounts Receivable—Jennings Company
Sales
11,123
[$11,350 – ($11,350 2%)].
18
Accounts Receivable—Jennings Company
Cash
475
18
Cost of Goods Sold
Inventory
6,800
24
Cash ($15,840 – $2,970)
Accounts Receivable—Loeb Co.
12,870
28
Cash ($11,123 + $475)
Accounts Receivable—Jennings Company
11,598
31
Delivery Expense
Cash
8,550
31
Cash
Accounts Receivable—Landscapes Co.
33,450
Aug.
3
Credit Card Expense
Cash
3,770
10
Sales Tax Payable
Cash
41,260
CHAPTER 5 Accounting for Retail Businesses
5–43
Prob. 5–3B
July
3
Inventory
Accounts Payable—Hamling Co.
61,426
{[$72,000 – ($72,000 15%)] = $61,200;
[$61,200 – ($61,200 2%)] + $1,450}.
5
Inventory
Accounts Payable—Kester Co.
32,781
[$33,450 – ($33,450 2%)].
6
Accounts Receivable—Parsley Co.
Sales
36,000
6
Cost of Goods Sold
Inventory
25,000
7
Accounts Payable—Kester Co.
Inventory
6,713
[$6,850 – ($6,850 2%)].
13
Accounts Payable—Hamling Co.
Cash
61,426
15
Accounts Payable—Kester Co.
Cash
26,068
($32,781 – $6,713).
21
Cash
Accounts Receivable—Parsley Co.
36,000
21
Cash
Sales
108,000
21
Cost of Goods Sold
Inventory
64,800
22
Accounts Receivable—Tabor Co.
Sales
16,317
[$16,650 – ($16,650 2%)].
22
Cost of Goods Sold
Inventory
10,000
CHAPTER 5 Accounting for Retail Businesses
5–44
Prob. 5–3B (Concluded)
July
23
Cash
Sales
91,200
23
Cost of Goods Sold
Inventory
55,000
28
Customers Refunds Payable
Cash
7,150
28
Inventory
Estimated Returns Inventory
4,250
31
Credit Card Expense
Cash
1,650
CHAPTER 5 Accounting for Retail Businesses
5–45
Prob. 5–4B
1.
Apr.
2
Accounts Receivable—Bird Company
Sales [$32,000 – ($32,000 2%)]
31,360
2
Accounts Receivable—Bird Company
Cash
330
2
Cost of Goods Sold
Inventory
19,200
8
Accounts Receivable—Bird Company
Sales
49,005
[$49,500 – ($49,500 1%)].
8
Cost of Goods Sold
Inventory
29,700
8
Delivery Expense
Cash
710
12
Cash
Accounts Receivable—Bird Company
31,690
($31,360 + $330).
23
Cash
Accounts Receivable—Bird Company
49,005
24
Accounts Receivable—Bird Company
Sales
67,350
24
Cost of Goods Sold
Inventory
40,400
25
Customer Refunds Payable
Cash
1,200
30
Cash
Accounts Receivable—Bird Company
67,350
CHAPTER 5 Accounting for Retail Businesses
5–46
Prob. 5–4B (Concluded)
2.
Apr.
2
Inventory
Accounts Payable—Swan Company
31,690
($31,360 + $330).
8
Inventory
Accounts Payable—Swan Company
49,005
[$49,500 – ($49,500 1%)].
12
Accounts Payable—Swan Company
Cash
31,690
23
Accounts Payable—Swan Company
Cash
49,005
24
Inventory
Accounts Payable—Swan Company
67,350
25
Cash
Inventory
1,200
26
Inventory
Cash
875
30
Accounts Payable—Swan Company
Cash
67,350
CHAPTER 5 Accounting for Retail Businesses
Prob. 5–5B
1.
Kanpur Co.
Income Statement
For the Year Ended June 30, 20Y7
Sales
$ 8,925,000
Cost of goods sold
(5,620,000)
Gross profit
$ 3,305,000
Expenses:
Selling expenses:
Sales salaries expense
$850,000
Advertising expense
420,000
Depreciation expense—store
equipment
33,000
Miscellaneous selling expense
18,000
Total selling expenses
$1,321,000
Administrative expenses:
Office salaries expense
$540,000
Rent expense
48,000
Insurance expense
24,000
Depreciation expense—office
equipment
10,000
Office supplies expense
4,000
Miscellaneous administrative expense
6,000
Total administrative expenses
632,000
Total operating expenses
(1,953,000)
Operating income
$ 1,352,000
Other revenue and expense:
Interest expense
(12,000)
Net income
$ 1,340,000
2.
Kanpur Co.
Statement of Stockholders’ Equity
For the Year Ended June 30, 20Y7
Common
Retained
Stock
Earnings
Total
Balances, July 1, 20Y6
$ 42,500
$ 381,000
$ 423,500
Issued common stock
7,500
7,500
Net income
1,340,000
1,340,000
Dividends
(300,000)
(300,000)
Balances, June 30, 20Y7
$ 50,000
$1,421,000
$ 1,471,000
CHAPTER 5 Accounting for Retail Businesses
5–48
Prob. 5–5B (Concluded)
3.
Kanpur Co.
Balance Sheet
June 30, 20Y7
Assets
Current assets:
Cash
$ 92,000
Accounts receivable
450,000
Inventory
370,000
Estimated returns inventory
5,000
Office supplies
10,000
Prepaid insurance
12,000
Total current assets
$ 939,000
Property, plant, and equipment:
Office equipment
$220,000
Accum. depreciation—office equipment
(58,000)
Book value—office equipment
$ 162,000
Store equipment
$650,000
Accum. depreciation—store equipment
(87,500)
Book value—store equipment
562,500
Total property, plant, and equipment
724,500
Total assets
$1,663,500
Liabilities
Current liabilities:
Accounts payable
$ 38,500
Salaries payable
4,000
Customer refunds payable
10,000
Note payable (current portion)
7,000
Total current liabilities
$ 59,500
Long-term liabilities:
Note payable (long-term portion)
133,000
Total liabilities
$ 192,500
Stockholders’ Equity
Common stock
$ 50,000
Retained earnings
1,421,000
Total stockholders’ equity
1,471,000
Total liabilities and stockholders’ equity
$1,663,500
4. The multiple-step form of income statement contains various sections for revenues and
CHAPTER 5 Accounting for Retail Businesses
5–49
Prob. 5–6B
1.
Kanpur Co.
Income Statement
For the Year Ended June 30, 20Y7
Sales
$ 8,925,000
Expenses:
Cost of goods sold
$5,620,000
Selling expenses
1,321,000
Administrative expenses
632,000
Interest expense
12,000
Total expenses
(7,585,000)
Net income
$ 1,340,000
2.
Kanpur Co.
Statement of Stockholders’ Equity
For the Year Ended June 30, 20Y7
Common
Stock
Retained
Earnings
Total
Balances, July 1, 20Y6
$42,500
$ 381,000
$ 423,500
Issued common stock
7,500
7,500
Net income
1,340,000
1,340,000
Dividends
(300,000)
(300,000)
Balances, June 30, 20Y7
$50,000
$1,421,000
$1,471,000
CHAPTER 5 Accounting for Retail Businesses
5–50
Prob. 5–6B (Continued)
3.
Kanpur Co.
Balance Sheet
June 30, 20Y7
Assets
Current assets:
Cash
$ 92,000
Accounts receivable
450,000
Inventory
370,000
Estimated returns inventory
5,000
Office supplies
10,000
Prepaid insurance
12,000
Total current assets
$ 939,000
Property, plant, and equipment:
Office equipment
$220,000
Accum. depreciation—office equipment
(58,000)
Book value—office equipment
$ 162,000
Store equipment
$650,000
Accum. depreciation—store equipment
(87,500)
Book value—store equipment
562,500
Total property, plant, and equipment
724,500
Total assets
$1,663,500
Liabilities
Current liabilities:
Accounts payable
$ 38,500
Salaries payable
4,000
Customer refunds payable
10,000
Note payable (current portion)
7,000
Total current liabilities
$ 59,500
Long-term liabilities:
Note payable (long-term portion)
133,000
Total liabilities
$ 192,500
Stockholders’ Equity
Common stock
$ 50,000
Retained earnings
1,421,000
Total stockholders’ equity
1,471,000
Total liabilities and stockholders’ equity
$1,663,500
CHAPTER 5 Accounting for Retail Businesses
5–51
Prob. 5–6B (Concluded)
4.
20Y7
Closing Entries
June
30
Sales
Cost of Goods Sold
5,620,000
Sales Salaries Expense
850,000
Advertising Expense
420,000
Depreciation Expense—Store Equipment
33,000
Miscellaneous Selling Expense
18,000
Office Salaries Expense
540,000
Rent Expense
48,000
Insurance Expense
24,000
Depreciation Expense—Office Equipment
10,000
Office Supplies Expense
4,000
Miscellaneous Administrative Expense
6,000
Interest Expense
12,000
Retained Earnings
1,340,000
30
Retained Earnings
Dividends
300,000
CHAPTER 5 Accounting for Retail Businesses
5–52
Appendix 2 Prob. 5–7B
Mar.
1
Purchases
43,250
Freight In
650
Accounts Payable—Haas Co.
43,900
5
Purchases
19,175
Accounts Payable—Whitman Co.
19,175
10
Accounts Payable—Haas Co.
43,900
Cash
43,035
Purchases Discounts
865
13
Purchases
15,550
Accounts Payable—Jost Co.
15,550
14
Accounts Payable—Jost Co.
3,750
Purchases Returns and Allowances
3,750
18
Purchases
13,560
Accounts Payable—Fairhurst Company
13,560
18
Freight In
140
Cash
140
19
Purchases
6,500
Accounts Payable—Bickle Co.
6,500
23
Accounts Payable—Jost Co.
11,800
Cash
11,564
Purchases Discounts
236
29
Accounts Payable—Bickle Co.
6,500
Cash
6,370
Purchases Discounts
130
31
Accounts Payable—Fairhurst Company
13,560
Cash
13,560
31
Accounts Payable—Whitman Co.
19,175
Cash
19,175
CHAPTER 5 Accounting for Retail Businesses
5–53
Appendix 2 Prob. 5–8B
July
3
Purchases
61,200
Freight In
1,450
Accounts Payable—Hamling Co.
62,650
[$72,000 – ($72,000 15%) = $61,200].
5
Purchases
33,450
Accounts Payable—Kester Co.
33,450
6
Accounts Receivable—Parsley Co.
36,000
Sales
36,000
7
Accounts Payable—Kester Co.
6,850
Purchases Returns and Allowances
6,850
13
Accounts Payable—Hamling Co.
62,650
Cash
61,426
Purchases Discounts
1,224
15
Accounts Payable—Kester Co.
26,600
Cash
26,068
Purchases Discounts
532
21
Cash
36,000
Accounts Receivable—Parsley Co.
36,000
21
Cash
108,000
Sales
108,000
22
Accounts Receivable—Tabor Co.
16,317
Sales
16,317
[$16,650 – ($16,650 2%)].
23
Cash
91,200
Sales
91,200
28
Customers Refunds Payable
7,150
Cash
7,150
31
Credit Card Expense
1,650
Cash
1,650
CHAPTER 5 Accounting for Retail Businesses
5–54
Appendix 2 Prob. 5–9B
1.
Apr.
2
Accounts Receivable—Bird Company
31,360
Sales
31,360
[$32,000 – ($32,000 2%)].
2
Accounts Receivable—Bird Company
330
Cash
330
8
Accounts Receivable—Bird Company
49,005
Sales
49,005
[$49,500 – ($49,500 1%)].
8
Delivery Expense
710
Cash
710
12
Cash ($31,360 + $330)
31,690
Accounts Receivable—Bird Company
31,690
23
Cash
49,005
Accounts Receivable—Bird Company
49,005
24
Accounts Receivable—Bird Company
67,350
Sales
67,350
25
Customer Refunds Payable
1,200
Cash
1,200
30
Cash
67,350
Accounts Receivable—Bird Company
67,350
CHAPTER 5 Accounting for Retail Businesses
5–55
Appendix 2 Prob. 5–9B (Concluded)
2.
Apr.
2
Purchases
Freight In
Accounts Payable—Swan Company
32,330
8
Purchases
Accounts Payable—Swan Company
49,500
12
Accounts Payable—Swan Company
Cash
31,690
Purchases Discounts
640
23
Accounts Payable—Swan Company
Cash
49,005
Purchases Discounts
495
24
Purchases
Accounts Payable—Swan Company
67,350
25
Cash
Purchases Returns and Allowances
1,200
26
Freight In
Cash
875
30
Accounts Payable—Swan Company
Cash
67,350
Appendix 2 Prob. 5–10B
1. Periodic inventory system. Simkins Company uses a periodic inventory system
2. See next page.
CHAPTER 5 Accounting for Retail Businesses
5–56
Appendix 2 Prob. 5–10B (Continued)
2.
Simkins Company
Income Statement
For the Year Ended June 30, 20Y9
Sales
$6,590,000
Cost of goods sold:
Inventory, July 1, 20Y8
$ 415,000
Cost of merchandise purchased:
Purchases
$4,100,000
Purchases returns and allowances
(32,000)
Purchases discounts
(13,000)
Freight in
45,000
Total cost of merchandise purchased
4,100,000
Inventory available for sale
$4,515,000
Inventory, June 30, 20Y9
(508,000)
Cost of goods sold before estimated returns
$4,007,000
Increase in estimated returns inventory
(8,000)
Cost of goods sold
(3,999,000)
Gross profit
$2,591,000
Expenses:
Selling expenses:
Sales salaries expense
$ 580,000
Advertising expense
315,000
Delivery expense
18,000
Depreciation expense—store equipment
12,000
Miscellaneous selling expense
28,000
Total selling expenses
$ 953,000
Administrative expenses:
Office salaries expense
$ 375,000
Rent expense
43,000
Insurance expense
17,000
Office supplies expense
5,000
Depreciation expense—office equipment
4,000
Miscellaneous administrative expense
16,000
Total administrative expenses
460,000
Total operating expenses
(1,413,000)
Operating income
$1,178,000
Other revenue and expense:
Rent revenue
$ 32,500
Interest expense
(2,500)
30,000
Net income
$1,208,000
CHAPTER 5 Accounting for Retail Businesses
5–57
Appendix Prob. 5–10B (Concluded)
3.
20Y9
Closing Entries
June
30
Inventory
508,000
Estimated Returns Inventory
8,000
Sales
6,590,000
Purchases Returns and Allowances
32,000
Purchases Discounts
13,000
Rent Revenue
32,500
Inventory
415,000
Purchases
4,100,000
Freight In
45,000
Sales Salaries Expense
580,000
Advertising Expense
315,000
Delivery Expense
18,000
Depreciation Expense—Store Equipment
12,000
Miscellaneous Selling Expense
28,000
Office Salaries Expense
375,000
Rent Expense
43,000
Insurance Expense
17,000
Office Supplies Expense
5,000
Depreciation Expense—Office Equipment
4,000
Miscellaneous Administrative Expense
16,000
Interest Expense
2,500
Retained Earnings
1,208,000
30
Retained Earnings
275,000
Dividends
275,000
CHAPTER 5 Accounting for Retail Businesses
5–58
COMPREHENSIVE PROBLEM 2
1., 2., 6., and 9.
Account:
Cash
Account No.
110
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
83,600
1
20
5,000
4
20
600
7
20
22,300
10
20
54,000
13
20
35,280
15
20
11,000
16
20
67,130
19
20
18,700
19
20
33,450
20
20
13,230
21
21
2,300
21
21
42,900
26
21
7,500
28
21
85,000
29
21
2,400
30
21
111,200
31
21
82,170
84,500
Account:
Accounts Receivable
Account No.
112
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
233,900
6
20
67,130
7
20
22,300
16
20
67,130
20
21
108,900
21
21
2,300
21
21
42,900
30
21
77,175
30
21
111,200
245,875
CHAPTER 5 Accounting for Retail Businesses
5–59
Comp. Prob. 2 (Continued)
Account:
Inventory
Account No.
115
Date
Item
Post.
Ref.
Debit
Balance
Credit
Debit
Credit
20Y6
May
1
Balance
✓
624,400
3
20
35,280
4
20
600
6
20
41,000
10
20
32,000
19
20
18,700
20
20
8,000
20
21
70,000
21
21
87,120
24
21
4,950
26
21
4,800
30
21
47,000
583,950
31
Adjusting
22
13,950
570,000
Account:
Estimated Returns Inventory
Account No.
116
Date
Item
Post.
Ref.
Debit
Balance
Credit
Debit
Credit
20Y6
May
1
Balance
✓
28,000
20
20
8,000
26
21
4,800
15,200
31
Adjusting
22
35,000
50,200
Account:
Prepaid Insurance
Account No.
117
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
✓
16,800
31
Adjusting
22
12,000
4,800
Account:
Store Supplies
Account No.
118
Date
Item
Post.
Ref.
Debit
Balance
Credit
Debit
Credit
20Y6
May
1
Balance
✓
11,400
29
21
2,400
13,800
31
Adjusting
22
9,800
4,000
CHAPTER 5 Accounting for Retail Businesses
5–60
Comp. Prob. 2 (Continued)
Account:
Store Equipment
Account No.
123
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
✓
569,500
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
1
Balance
✓
56,700
31
Adjusting
22
14,000
70,700
Account:
Accounts Payable
Account No.
210
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
96,600
3
20
35,280
13
20
35,280
19
20
33,450
21
21
87,120
24
21
4,950
31
21
82,170
63,150
Account:
Salaries Payable
Account No.
211
Post.
Balance
Date
Item
Ref.
Debit
Credit
Debit
Credit
20Y6
May
31
Adjusting
22
13,600
13,600
Account:
Customers Refunds Payable
Account No.
212
Date
Item
Post.
Ref.
Debit
Credit
Balance
Debit
Credit
20Y6
May
1
Balance
✓
50,000
20
20
13,230
26
21
7,500
29,270
31
Adjusting
22
60,000
89,270