CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
3.
Debit Credit
Capital Stock 100,000
Retained Earnings 585,300
Dividends 135,000
Sales 5,532,350
Sales Returns and Allowances 113,700
May 31, 2014
PALISADE CREEK CO.
Unadjusted Trial Balance
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
4. and 6. Page 22
Post.
Ref. Debit Credit
2014
May 31 Cost of Merchandise Sold 510 11,950
Merchandise Inventory 115 11,950
Inventory shrinkage
($561,950 – $550,000).
Date
JOURNAL
Adjusting Entries
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
7.
Debit Credit
Balances Balances
Retained Earnings 585,300
Dividends 135,000
Sales 5,532,350
Sales Returns and Allowances 113,700
Sales Discounts 61,600
May 31, 2014
PALISADE CREEK CO.
Adjusted Trial Balance
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
8.
Revenue from sales:
Sales $5,532,350
Store supplies expense 9,800
Miscellaneous selling expense 12,600
Total selling expenses $1,056,200
Administrative expenses:
Office salaries expense $417,700
Retained earnings, June 1, 2013 $ 585,300
Net income for the year $762,500
PALISADE CREEK CO.
Retained Earnings Statement
For the Year Ended May 31, 2014
PALISADE CREEK CO.
Income Statement
For the Year Ended May 31, 2014
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
Current assets:
Current liabilities:
Liabilities
PALISADE CREEK CO.
Balance Sheet
May 31, 2014
Assets
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
9. Page 23
Post.
Ref. Debit Credit
2014
May 31 Sales 410 5,532,350
Income Summary 313 5,532,350
31 Income Summary 313 4,769,850
Date
JOURNAL
Closing Entries
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Continued)
10.
Debit Credit
Balances Balances
Cash 84,500
Accounts Receivable 247,450
Merchandise Inventory 550,000
May 31, 2014
PALISADE CREEK CO.
Post-Closing Trial Balance
CHAPTER 5 Accounting for Merchandising Businesses
Comp. Problem 2 (Concluded)
5. Optional.
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 84,500 84,500 84,500
Capital Stock 100,000 100,000 100,000
Retained Earnings 585,300 585,300 585,300
Dividends 135,000 135,000 135,000
Sales 5,532,350 5,532,350 5,532,350
Insurance Expense (b) 12,000 12,000 12,000
Miscellaneous Admin. Expense 7,800 7,800 7,800
SheetTrial Balance
Debit Credit
Trial Balance
Income
StatementAdjustments
PALISADE CREEK CO.
End-of-Period Spreadsheet (Work Sheet)
For the Year Ended May 31, 2014
BalanceUnadjusted Adjusted
CHAPTER 5 Accounting for Merchandising Businesses
CP 5–1
Standards of Ethical Conduct for Management Accountants requires management
CP 5–2
Cam Pfeifer is correct. The accounts payable due suppliers could be included on
the balance sheet at an amount of $314,500 ($269,500 + $45,000). This is the
amount that will be expected to be paid to satisfy the obligation (liability) to
CASES & PROJECTS
CHAPTER 5 Accounting for Merchandising Businesses
CP 5–3
1. If Mark doesn’t need the stereo immediately (by the next day), Wholesale Stereo
offers the best buy, as shown below.
Wholesale Stereo:
List price…………………………………………………………………………
…
$1,200.00
Shipping and handling (not including next-day air)……………………
…
49.99
Even if the 2% cash discount offered by Tru-Sound Systems is considered,
Wholesale Stereo still offers the best buy, as shown below.
List price…………………………………………………………………………
…
$1,175.00
Less 2% cash discount.………………………………………………………
…
23.50
…
If Mark needs the stereo immediately (the next day), then Tru-Sound Systems has the
…
…
…
…
CHAPTER 5 Accounting for Merchandising Businesses
CP 5–3 (Concluded)
Tru-Sound Systems price (see previous page)…………………………………
…
$1,280.75
Less first installment (down payment)……………………………………………
…
426.92
Tru-Sound Systems price (see above)………………………………………
$1,280.75
2. Other considerations in buying the stereo include the ability to have the stereo
repaired locally. In addition, Tru-Sound Systems’ employees would presumably
CHAPTER 5 Accounting for Merchandising Businesses
CP 5–4
1.
Revenues:
Net sales (a) $1,485,000
Interest revenue 15,000
Notes:
a. Projected net sales
b. Projected cost of merchandise sold
c. Total selling expenses for year ended October 31,
2014…………………………………………………………
…
$ 140,000
d. Total administrative expenses for year ended
October 31, 2014……………………………………………
…
$90,000
WATERCRAFT SUPPLY COMPANY
Projected Income Statement
For the Year Ended October 31, 2015
CP 5–4 (Concluded)
2. a. Yes. The proposed change will increase net income from $321,000 to
b. Possible concerns related to the proposed changes include the following:
The primary concern is with the accuracy of the estimates used for
projecting the effects of the proposed changes. If the increase in sales
CP 5–5
Note to Instructors: The purpose of this activity is to familiarize students with the
variety of possible purchase prices for a fairly common household item. Students
should report several alternative prices when they consider the source of the