Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-9 (20 minutes)
PERPETUAL
Nov. 1 Merchandise Inventory ………………………………. 1,500
Accounts Payable ……………………………….. 1,500
Record purchases, terms 2/5, n/30.
Nov. 13 Accounts Receivable …………………………………. 1,600
Sales …………………………………………………… 1,600
Record sale of goods, terms n/30.
Cost of Goods Sold ……………………………………. 800
Merchandise Inventory ………………………… 800
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-10 (25 minutes)
Adjusting entries
Dec. 31 Sales Salaries Expense …………………………….. 1,700
Salaries Payable…………………………………. 1,700
Record accrued salaries.
Closing entries
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
Sales Discounts ………………………………. 5,000
Exercise 4-11 (10 minutes)
Multiple-Step Income Statement — Sales Related Information Only
Sales (gross) ……………………………………………………… $200,000
Exercise 4-12 (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 4-13 (20 minutes)
a. Understatement.
Gross margin (Gross profit / Sales) would be understated because COGS is
overstated, meaning that gross profit would be understated.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-14 (15 minutes)
Camaro
GTO
Torino
Current ratio computation
Current assets ……………………
$5,200
$3,500
$7,410
Current liabilities ………………..
$2,000
$1,000
$3,800
Current ratio ……………………….
2.60
3.50
1.95
Acid-test ratio computation
$1,000
Current receivables …………….
$2,280
Current liabilities ………………..
$1,000
$3,800
1.20
0.58
0.60
Interpretation:
Camaro has the highest acid-test ratio and a healthy current ratio. Since
Camaro has enough current assets to cover its current liabilities by more than
two times and enough quick assets to cover its current liabilities by more than
one time, Camaro appears to be in the best position to meet its short–term
obligations.
More specifically, GTO exhibits superior ability to meet current year
Exercise 4-15 (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
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Exercise 4-16 (20 minutes)
ADAMS CO.
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $16,000
Accounts receivable ………………………………. 4,000
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 4-17A (30 minutes)
PERIODIC—Buyer (Gross Method)
Apr. 2 Purchases …………………………………………………. 4,600
Accounts Payable—Lyon …………………….. 4,600
Purchased merchandise on credit.
18 Purchases …………………………………………………. 8,500
Accounts Payable—Frist …………………….. 8,500
Purchased merchandise on credit.
21 Accounts Payable—Frist ……………………………. 500
Purchases Returns & Allowances ………… 500
Received an allowance on purchase.
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Exercise 4-18A (30 minutes)
1. BUYER– Santa Fe (Periodic & Gross Method)
a) Credit Purchase
Purchases ………………………………………………… 24,000
Accounts Payable ………………………………. 24,000
Purchased merchandise on credit.
2. SELLER – Mesa (Periodic & Gross Method)
a) Credit Sale
Accounts Receivable ………………………………… 24,000
Sales ………………………………………………….. 24,000
Sold merchandise on account.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-19A (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.
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Exercise 4-20B (15 minutes)
a.
Dec. 31 Sales Discounts …………………………………………………. 20
Allowance for Sales Discounts …………………… 20
Exercise 4-21B (25 minutes)
a.
Dec. 31 Sales Returns and Allowances …………………………... 60,000
Sales Refund Payable ………………………………… 60,000
Expected sales to be refunded.
b.
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Exercise 4-22B (25 minutes)
a. $70,000 ($100,000 sales – $30,000 cost of sales)
b. (1) Sales Returns and Allowances …………………………... 5,000
c. Liability account (usually a current liability).
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-23C (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%])
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-24C (25 minutes)
BUYER—Perpetual & Gross Method
a.
Recording inventory at gross amounts
Oct. 2
Merchandise Inventory …………………………………………
3,000
Accounts Payable …………………………………………..
3,000
Accounts Payable ………………………………………………..
Merchandise Inventory …………………………………..
Merchandise Inventory …………………………………………
5,400
Accounts Payable …………………………………………..
5,400
Accounts Payable ………………………………………………..
5,400
Merchandise Inventory* ………………………………….
Cash ……………………………………………………….……..
5,292
Accounts Payable ………………………………………………..
2,500
Cash ……………………………………………………….……..
2,500
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Exercise 4-24C (Concluded)
BUYER—Perpetual & Net Method
b.
Recording inventory at net amounts
Oct. 2
Merchandise Inventory …………………………………………
2,940
Accounts Payable …………………………………………..
2,940
Accounts Payable ………………………………………………..
Merchandise Inventory ……………………………………
Merchandise Inventory …………………………………………
5,292
Accounts Payable …………………………………………..
5,292
Accounts Payable ………………………………………………..
5,292
Cash ……………………………………………………….……..
5,292
Cash ……………………………………………………….……..
2,500
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Exercise 4-25 (30 minutes)
Mar. 3 Merchandise Inventory ………………………………. 1,150
Accounts Payable—GreenWorld ………….. 1,150
Purchased merchandise on credit.
18 Accounts Payable—GreenWorld ………………… 1,000
Merchandise Inventory ………………………… 20
Cash* ………………………………………………….. 980
Paid within discount period less returns.
*($1,150 – $150) x (100% – 2%)
19 Merchandise Inventory ……………………………… 425
Accounts Payable—PeopleFirst …………… 425
Purchased merchandise on credit.
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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.
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, Shaw, Financial & Managerial Accounting, 8e 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.
*$6,000 x 1%
24 Accounts Payable—Leight …………………………. 2,000
Merchandise Inventory* ………………………. 40
Cash …………………………………………………… 1,960
Paid for goods within discount period.
*$2,000 x 2%
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Problem 4-2A (40 minutes)—Perpetual and Gross Method
Aug. 1 Merchandise Inventory ………………………………. 7,500
Accounts Payable—Aron …………………….. 7,500
Purchased goods, terms 1/10, n/30.
5 Accounts Receivable—Baird ……………………… 5,200
Sales …………………………………………………… 5,200
Sold goods, terms 2/10, n/60.
10 Sales Returns and Allowances …………………… 600
Accounts Receivable—Baird ……………….. 600
Customer returned merchandise.
10 Merchandise Inventory ………………………………. 400
Cost of Goods Sold …………………………….. 400
Returned goods to inventory.
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Problem 4-2A (Concluded)
Aug. 15 Cash ………………………………………………………….. 4,508
Sales Discounts* ……………………………………….. 92
Accounts Receivable—Baird ……………….. 4,600
Received payment within discount period.
*($5,200 – $600) x 2%
19 Cost of Goods Sold ……………………………………. 2,400
Merchandise Inventory ………………………… 2,400
Record cost of August 19 sale.
22 Sales Returns and Allowances …………………… 500
Accounts Receivable—Tux ………………….. 500
Issued a price reduction.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 4
Problem 4-3A (40 minutes)
1. Net sales
Sales ……………………………………………………………………..
$225,600
Sales returns and allowances ……………………..
12,000
2. Cost of Merchandise purchased
Invoice cost of merchandise purchased …………………
$ 92,000
Purchases returns and allowances …………………………
(4,500)