11
Preparing a Worksheet
for a Merchandise
Company Using the
Perpetual Method
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. The periodic inventory system is used when the company does not need to keep a
2. The perpetual inventory system is used when there is a need to know the balance
in inventory continually, or perpetually. Inventory is updated every time that there is
4. Unearned revenue is cash you have received for a service or product that has not
5. To verify the accuracy of the accounting records, a physical inventory should be
performed at the end of the reporting period. This is usually done near year end. If
7. The question in this case is whether Jim should use the petty cash fund for his own
personal use. Jim’s poor financial situation should not be an adequate excuse to
SOLUTIONS TO CONCEPT CHECKS
1. Adjusting Entries
2.a.
3.
a.
1
2
e.
3
4.
SOLUTIONS TO SET A EXERCISES
11A–1.
(a)
Debit
Expense
(e)
Liability
Liability
11A-2.
(a)
Net Sales:
–
Sales R & A
–
Sales Disc.
=
Net Sales
–
–
=
(b)
Gross Profit:
–
Cost of Goods Sold
=
Gross Profit
–
=
$8,050
(c)
Net Income:
–
Operating Expense
=
Net Income
–
=
11A-3.
Account
Category
Incr. Or Decr.
Rules
Amount
Unearned Janitorial Service Revenue
Liability
Decrease
Debit
Janitorial Service Revenue
Revenue
Increase
Credit
11A-4.
Balance Sheet
Debit
8
5
13
4
20
50
1
Credit
8
5
13
4
20
9
21
12
13
4
6
115
Debit
(C) 4
(C) 4
(C) 4
6
5
SOLUTIONS TO SET B EXERCISES
11B–1.
(a)
Debit
Contra-Revenue
(b)
Debit
Asset
(e)
Debit
Contra-Revenue
Expense
Liability
11B-2.
(a)
Net Sales:
–
Sales R & A
–
Sales Disc.
=
Net Sales
–
$5,000
–
=
$29,200
(b)
Gross Profit:
–
Cost of Goods Sold
=
Gross Profit
–
=
$15,500
(c)
Net Income:
–
Operating Expense
=
Net Income
–
$4,900
=
$10,600
11B-3.
Account
Category
Incr. Or Decr.
Rules
Amount
Unearned Janitorial Service Revenue
Liability
Decrease
Debit
Janitorial Service Revenue
Revenue
Increase
Credit
Income Statement Balance Sheet
FOR THE YEAR ENDED DECEMBER 31, 2018
Debit
14
6
38
67
3
128
Credit
(A) 1
(D) 3
(B) 4
(C) 7
15
SOLUTIONS TO SET A PROBLEMS
PROBLEM 11A-1
a
Net sales is $9,541. (Sales $10,200 – Sales R & A $275 – Sales discount $394)
b
c
d
PROBLEM 11A-2
Credit
720
516
1,632
90
2,958
2,289
5,247
Income Statement
Debit
Adj. Trial Balance
Credit
(B) 150
(C) 60
(A)15
(D) 90
315
Account Titles
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Insurance
Store Equipment
Acc. Dep., Store Equip.
Accounts Payable
Jim Spool, Capital
Sales
Sales Ret. & Allow.
Sales Discount
Cost of Goods Sold
Wages Expense
Rent Expense
Telephone Expense
Miscellaneous Expense
Insurance Expense
Dep. Exp., Store Equip.
Wages Payable
Net Income
PROBLEM 11A-3
Credit
Income Statement
WALTZ COMPANY
WORKSHEET
Debit
2,400
29,239
7,718
2,400
44,184
8,300
52,484
310
1,552
PROBLEM 11A-4
Credit
Income Statement
Debit
25,775
12,000
43,500
45,176
Credit
WORKSHEET
108
150
181
176
Credit
(E) 176
2,276
Trial Balance
Debit
25,275
12,000
71,310
Account Titles
Cash
Petty Cash
Accounts Receivable
Merchandise Inventory
Supplies
Prepaid Insurance
Store Equipment
Acc. Dep., Store Equip.
Accounts Payable
Federal Income Tax Payable
FICA— Social Security Payable
FICA—Medicare Payable
Unearned Storage Fees
Ron Win, Capital
Ron Win, Withdrawals
Sales
Sales Ret. & Allow.
Sales Discount
Cost of Goods Sold
Salaries Expense
Payroll Tax Expense
Interest Expense
Supplies Expense
Insurance Expense
Dep. Exp., Store Equip.
Earned Storage Fees
Net Income/Loss
SOLUTIONS TO SET B PROBLEMS
PROBLEM 11B-1
a
Net sales is $3,259. (Sales $3,950 – Sales R & A $191 – Sales discounts $500)
b
Cost of goods sold is $1,083. (COGS $1,087 – extra in Merch. Inv. $4)
c
Gross profit is $2,176. (Net sales $3,259 – Cost of Goods Sold $1,083)
d
Net income is $1,281. (Gross profit $2,176 – Operating expenses $895)
PROBLEM 11B-2
Credit
Credit
1,770
1,408
2,576
150
5,904
1,692
7,596
Income Statement
Debit
Credit
1,770
1,408
2,576
14,800
150
20,704
Adjustments
(A) 100
(A) 100
(D) 150
(B) 112
(C) 90
452
Account Titles
Cash
Accounts Receivable
Merchandise Inv.
Prepaid Insurance
Store Equipment
Ace. Dep., Store Equip.
Accounts Payable
Jim Spool, Capital
Sales
Sales Ret. & Allow.
Sales Discount
Cost of Goods Sold
Wages Expense
Rent Expense
Telephone Expense
Miscellaneous Expense
Insurance Expense
Dep. Exp., Store Equip.
Wages Payable
Net Income
Balance Sheet
Credit
3,800
100
3,400
5,000
600
470
9,680
5,000
28,050
28,050
Income Statement
4,290
7,964
5,476
52,462
180
70,372
Adjustments
Debit
(A) 204
(E) 180
(B) 890
(C) 600
(D) 250
Account Titles
Cash
Petty Cash
Accounts Receivable
Merchandise Inventory
Prepaid Rent
Office Supplies
Office Equipment
Acc. Dep., Office Equip.
Accounts Payable
K. Waltz, Capital
K. Waltz, Withdrawals
Sales
Sales Ret. & Allow.
Sales Discount
Cost of Goods Sold
Office Salaries Expense
Insurance Expense
Advertising Expense
Utilities Expense
Office Supplies Expense
Rent Expense
Dep. Exp., Office Equip.
Office Salaries Payable
Net Income
WORKSHEET
560
480
7,950
6,000
194
320
220
55
100
15,879
3,636
19,515
Adj. Trial Balance
Debit
(B) 220
(C) 55
840
Credit
30
270
180
560
480
194
320
FINANCIAL REPORT PROBLEM SOLUTION—Reading Amazon’s Annual Report
Cost of sales for Amazon in 2016 is $88,265 million.
SUAREZ COMPUTER CENTER
WORKSHEET
For Six Months Ended March 31, 201X
Account Titles
Trial Balance
Adjusting Entries
Adj. Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
11,576.29
11,576.29
Petty Cash
300.00
300.00
Accounts Receivable
12,370.00
12,370.00
Merchandise Inventory
5,555.00
(b)5,355.00
200.00
Prepaid Rent
3,500.00
(e)3,000.00
500.00
Supplies
612.00
337.00
Computer Shop Equipment
4,860.00
4,860.00
Accumulated Depreciation, C.
S. Eq.
(c)570.00
675.00
Office Equipment
2,175.00
2,175.00
Of. Eq.
Accounts Payable
F. Suarez, Capital
16,617.00
16,617.00
F. Suarez, Withdrawals
915.00
915.00
Service Revenue
20,900.00
20,900.00
Sales
11,680.00
11,680.00
Sales Returns and
Allowances
460.00
460.00
Sales Discounts
243.00
243.00
Cost of Goods Sold
7,225.00
(b)5,355.00
12,580.00
Advertising Expense
Rent Expense
(e)3,000.00
3,000.00
Utilities Expense
Phone Expense
Supplies Expense
320.00
Insurance Expense
Postage Expense
Miscellaneous Expense
Wage Expense
Payroll Tax Expense
260.71
260.71
Total
52,732.00
52,732.00
Equip.
Depreciation Expense—Of.
Equip.
210.00
Total
53,512.00
53,512.00
Net Income
Total
Depreciation Expense—C.S.
(c)570.00
570.00
SUAREZ COMPUTER CENTER
WORKSHEET CONTINUED
For Six Months Ended March 31, 201X
Account Titles
Income Statement
Balance Sheet
Dr.
Cr.
Dr.
Cr.
Cash
Petty Cash
300.00
Accounts Receivable
Merchandise Inventory
200.00
Prepaid Rent
500.00
Supplies
337.00
Equipment
Accumulated
Depreciation, C. S. Eq.
Depreciation, Of. Eq.
Accounts Payable
Falco, Capital
Falco, Withdrawals
915.00
Service Revenue
Computer Shop
4,860.00
Sales
11,680.00
Sales Returns and
Allowances
460.00
Sales Discounts
243.00
Cost of Goods Sold
12,580.00
Advertising Expense
Rent Expense
Phone Expense
Supplies Expense
Insurance Expense
Postage Expense
Miscellaneous Expense
Wage Expense
Payroll Tax Expense
Total
Depreciation Expense—
C.S. Equip.
570.00
Depreciation Expense—
Of. Equip.
210.00
Total
20,278.71
32,580.00
Net Income
12,301.29
Total
32,580.00
32,580.00