Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-9 (30 minutes)
1. BUYER– Santa Fe
a) Credit Purchase
Merchandise Inventory ……………………………… 24,000
Accounts Payable ………………………………. 24,000
2. SELLER – Mesa
a) Credit Sale
Accounts Receivable ………………………………… 24,000
Sales ………………………………………………….. 24,000
Sold merchandise on account.
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Exercise 4-10 (25 minutes)
1. Entries for Sydney (BUYER):
May 11 Merchandise Inventory ……………………………. 40,000
Accounts Payable ……………………………… 40,000
Purchased goods.
2. Entries for Troy (SELLER):
May 11 Accounts Receivable ……………………………….. 40,000
Sales …………………………………………………. 40,000
Sold goods.
11 Cost of Goods Sold …………………………..……… 30,000
Merchandise Inventory ………………………. 30,000
Record cost of sale.
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Exercise 4-11 (30 minutes)
Merchandise Inventory
Balance, beginning-of–year ……..
25,000
Discounts received on merch …………………………..
1,700
Merchandise purchases ………….
Returns and allow. on merch …………………………..
4,000
Cost of Goods Sold
Cost of merchandise sold ……….
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Exercise 4-12 (20 minutes)
PERPETUAL
Nov. 1 Merchandise Inventory ………………………………. 1,500
Accounts Payable ……………………………….. 1,500
Record purchases, terms 2/5, n/30.
Nov. 10 Merchandise Inventory ………………………………. 90
Cash …………………………………………………… 90
Payment of freight charges.
Nov. 13 Accounts Receivable …………………………………. 1,600
Sales …………………………………………………… 1,600
Record sale of goods, terms n/30.
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Exercise 4-13 (20 minutes)
May 1 Merchandise Inventory ……………………………………… 875
Accounts Payable ……………………………………… 875
Record credit purchase.
June 3 Cost of Goods Sold …………………………………………… 300
Merchandise Inventory ……………………………… 300
Record cost of sale.
June 5 Sales Returns and Allowances …………………………... 20
Accounts Receivable …………………………………. 20
Record sales allowance.
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Exercise 4-14 (15 minutes)
Dec. 31 Cost of Goods Sold ………………………………… 1,000
Merchandise Inventory …………………….. 1,000
Exercise 4-15 (25 minutes)
Dec. 31 Sales …………………………………………………….. 529,000
Income Summary …………………………….. 529,000
Close temporary accounts with credit balances.
Dec. 31 Income Summary …………………………………… 444,500
Sales Returns and Allowances …………. 17,500
Dec. 31 Income Summary …………………………………… 84,500
Retained Earnings …………………………... 84,500
Close Income Summary account.
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Exercise 4-16 (20 minutes)
a. $3,000 Understatement
Explanation: The employee oversight in omitting these goods from the
physical count would cause ending inventory to be understated by $3,000.
Exercise 4-17 (10 minutes)
Multiple-Step Income Statement — Sales Related Information Only
Sales, gross ……………………………………………………….. $200,000
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Exercise 4-18 (25 minutes)
FIT–FOR-LIFE FOODS
Income Statement
For Year Ended December 31
Sales ……………………………………………………………………. $220,000
Less: Sales discounts ………………………………………….. $16,000
Sales returns and allowances …………………….. 4,000 20,000
Net sales …………………………..…………………………………. 200,000
General and administrative expenses
Office supplies expense ……………………………………. 700
Insurance expense …………………………………………… 1,300
Depreciation expense—Office copier ………………… 500
Office salaries expense …………………………………….. 32,500
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Exercise 4-19 (20 minutes)
ADAMS CO.
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $16,000
Accounts receivable ………………………………. 4,000
Merchandise inventory …………………………... 14,000
Liabilities
Current liabilities
Accounts payable …………………………………… $10,000
Salaries payable …………………………………….. 6,000
Equity
Common stock ………………………………………… 10,000
Retained Earnings ……………………………………. 50,000
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Exercise 4-20 (20 minutes)
a. Understatement.
Gross margin ratio (Gross profit / Sales) would be understated because COGS
is overstated, meaning that gross profit would be understated.
Exercise 4-21 (15 minutes)
a.
Acid-test ratio computation
Camaro
GTO
Torino
Cash …………………………..……..
$2,000
$ 110
$1,000
$2,400
$ 580
$2,280
$2,000
$3,800
b. Camaro
Explanation: Camaro appears to be in the best position to meet its short-term
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Exercise 4-22A (30 minutes)
PERIODIC—Buyer (Gross Method)
Apr. 2 Purchases …………………………………………………. 4,600
Accounts Payable—Lyon …………………….. 4,600
Purchased merchandise on credit.
3 Transportation–In ……………………………………….. 300
Cash …………………………………………………… 300
Paid shipping charges on merchandise.
18 Purchases …………………………………………………. 8,500
Accounts Payable—Frist …………………….. 8,500
Purchased merchandise on credit.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-23A (30 minutes)
1. BUYER– Santa Fe (Periodic & Gross Method)
a) Credit Purchase
Purchases ………………………………………………… 24,000
Accounts Payable ………………………………. 24,000
2. SELLER – Mesa (Periodic & Gross Method)
a) Credit Sale
Accounts Receivable ………………………………… 24,000
Sales ………………………………………………….. 24,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-24A (25 minutes)
1. Entries for Sydney (BUYER)—Periodic & Gross Method:
May 11 Purchases ……………………………………………….. 40,000
Accounts Payable ……………………………… 40,000
Purchased goods.
2. Entries for Troy (SELLER)—Periodic & Gross Method:
May 11 Accounts Receivable ……………………………….. 40,000
Sales …………………………………………………. 40,000
Sold goods.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-25B (15 minutes)
a.
Dec. 31 Sales Discounts …………………………………………………. 20
Allowance for Sales Discounts …………………… 20
Exercise 4-26B (25 minutes)
a.
Dec. 31 Sales Returns and Allowances …………………………... 60,000
Sales Refund Payable ………………………………… 60,000
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Exercise 4-27B (25 minutes)
a. $70,000 ($100,000 sales – $30,000 cost of sales)
b. (1) Sales Returns and Allowances …………………………... 5,000
Sales Refund Payable ………………………………… 5,000
Expected sales to be refunded. $100,000 x 5%
(2) Inventory Returns Estimated ……………………………… 1,500
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-28C (25 minutes)
1. Entries for Sydney (BUYER)—Perpetual & Net Method
May 11 Merchandise Inventory ……………………………………….. 38,800
Accounts Payable ………………………………………… 38,800
Purchased goods. ($40,000 x [100% – 3%])
2. Entries for Troy (SELLER)—Perpetual & Net Method
May 11 Accounts Receivable ………………………………………….. 38,800
Sales ……………………………………………………………. 38,800
Sold goods. ($40,000 x [100% – 3%])
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Exercise 4-29C (25 minutes)
BUYER—Perpetual & Gross Method
a.
Recording inventory at gross amounts
Oct. 2
Merchandise Inventory …………………………………………
3,000
Accounts Payable …………………………………………..
3,000
Record merchandise purchases.
10
Accounts Payable ………………………………………………..
500
Merchandise Inventory …………………………………..
500
17
Merchandise Inventory …………………………………………
5,400
Accounts Payable …………………………………………..
5,400
Record merchandise purchases.
Accounts Payable ………………………………………………..
5,400
Merchandise Inventory* ………………………………….
108
Cash ………………………………………………………………
5,292
31
Accounts Payable ………………………………………………..
2,500
Cash ………………………………………………………………
2,500
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Exercise 4-29C (Concluded)
BUYER—Perpetual & Net Method
b.
Recording inventory at net amounts
Oct. 2
Merchandise Inventory …………………………………………
2,940
Accounts Payable …………………………………………..
2,940
Record merchandise purchases less discount.
[$3,000 – ($3,000 x 0.02) = $2,940]
Accounts Payable ………………………………………………..
Merchandise Inventory ……………………………………
Record return of purchased inventory.
Merchandise Inventory …………………………………………
5,292
Accounts Payable …………………………………………..
5,292
Record merchandise purchases less discount.
27
Accounts Payable ………………………………………………..
5,292
Cash ………………………………………………………………
5,292
Paid for merchandise.
Cash ………………………………………………………………
2,500
($2,940 – $490 + $50)
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PROBLEM SET A
Problem 4-1A (40 minutes)—Perpetual & Gross Method
July 1 Merchandise Inventory ………………………………. 6,000
Accounts Payable—Boden ………………….. 6,000
Purchased goods, terms 1/15, n/30.
2 Accounts Receivable—Creek……………………… 900
Sales …………………………………………………… 900
Sold goods, terms 2/10, n/60.
8 Cash ………………………………………………………….. 1,700
Sales …………………………………………………… 1,700
Sold goods for cash.
8 Cost of Goods Sold ……………………………………. 1,300
Merchandise Inventory ………………………… 1,300
Record cost of the July 8 sale.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Problem 4-1A (Concluded)
July 16 Accounts Payable—Boden …………………………. 6,000
Merchandise Inventory* ………………………. 60
Cash …………………………………………………… 5,940
Paid for goods within discount period.
24 Accounts Payable—Leight …………………………. 2,000
Merchandise Inventory* ………………………. 40
Cash …………………………………………………… 1,960
Paid for goods within discount period.
*$2,000 x 2%