Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
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Chapter 4
Accounting for Merchandising
Operations
QUICK STUDIES
Quick Study 4-1 (10 minutes)
1. G. Merchandise inventory 5. H. Purchases discount
Quick Study 4-2 (5 minutes)
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Quick Study 4-3 (15 minutes)
a. (i) Computation of goods available for sale
Beginning inventory ……………………………………………. $5,000
Plus: Net purchases ……………………………………………. 3,900
b. Computation of net income
McNeil Merchandising Company
Net sales …………………………………………………………….. $9,500
Less: Cost of goods sold (see ii) …………………………. 7,200
Quick Study 4-4 (15 minutes)
Payment Computations
a. $ 4,900 = $ 5,000 – ($ 5,000 x 2%) = $ 5,000 x 98%
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-5 (15 minutes)
Nov. 5 Merchandise Inventory ……………………………………… 6,000
Accounts Payable ……………………………………… 6,000
Quick Study 4-6 (10 minutes)
a)
Aug. 1 Merchandise Inventory ………………………………………. 60,000
Quick Study 4-7 (10 minutes)
a)
Sep. 15 Merchandise Inventory ………………………………………. 35,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-8 (10 minutes)
May 1 Merchandise Inventory ……………………………………… 800
Accounts Payable ……………………………………… 800
Quick Study 4-9 (10 minutes)
Jun. 1 Merchandise Inventory ……………………………………… 450
Accounts Payable ……………………………………… 450
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-10 (15 minutes)
Apr. 1 Accounts Receivable ………………………………………… 3,000
Sales …………………………………………………………. 3,000
Record sale of goods.
Apr. 1 Cost of Goods Sold …………………………………………… 1,800
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-11 (15 minutes)
Oct. 1 Accounts Receivable ………………………………………… 1,500
Sales …………………………………………………………. 1,500
Record sale of goods.
Oct. 1 Cost of Goods Sold …………………………………………… 900
Quick Study 4-12 (15 minutes)
Income Statement Components
Oct. 1
Oct. 6
Oct. 9
Oct. 30
Sales (gross)
+1,500
+700
Sales discounts
+1,500
+700
Cost of goods sold _
+450
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-13 (15 minutes)
May 1 Accounts Receivable ………………………………………… 600
Sales …………………………………………………………. 600
Record sale of goods.
Quick Study 4-14 (10 minutes)
July 31 Cost of Goods Sold …………………………………………… 1,900
Quick Study 4-15 (10 minutes)
July 31 Sales ……………………………………………………….……….. 170,000
Income Summary ………………………………………. 170,000
Close temporary accounts with credit balances.
Quick Study 4-16 (10 minutes)
1. Multiple-step income statement 3. Multiple-step income statement
Quick Study 4-17 (15 minutes)
A
B
C
Sales (gross) …………………………..
$40,500
$20,000
$90,000
Sales discounts …………………………
Sales returns and allowances ……..
Net sales …………………………..……..
Cost of goods sold …………………….
Gross profit ………………………………
Quick Study 4-18 (15 minutes)
a. $60,000 + $90,000 – $2,000 – $11,000 = $137,000
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Quick Study 4-19 (15 minutes)
VITAMIX
Income Statement
For Year Ended December 31
Sales ……………………………………………………………………. $150,000
Quick Study 4-20 (20 minutes)
Save-the-Earth Co.
Income Statement
For Year Ended December 31
Sales ……………………………………………………………………. $20,000
Less: Sales discounts ………………………………………….. $750
Sales returns and allowances …………………….. 250 1,000
Net sales ……………………………………………………………… 19,000
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-21 (20 minutes)
Clear Water Co.
Balance Sheet
December 31
Assets
Current assets
Cash ………………………………………………………. $ 8,000
Accounts receivable ………………………………. 2,000
Liabilities
Current liabilities
Accounts payable …………………………………… $ 5,000
Wages payable ………………………………………. 3,000
Quick Study 4-22 (10 minutes)
a. ($1,490 + $2,800) / ($5,750 + $850) = 0.65
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Quick Study 4-23 (10 minutes)
a.
Carrier
Lennox
Trane
York
Sales ……………………………………..
$150,000
$550,000
$38,700
$255,700
Sales discounts ……………………..
(5,000)
(17,500)
(600)
(4,800)
$ 45,250
$196,911
$ 8,547
$123,500
b. York
Explanation: York has the most desirable gross margin ratio because it has
Quick Study 4-24A (5 minutes)
a. Periodic inventory system
Quick Study 4-25A (10 minutes)
Cost of Goods Sold* = $30,000
*Calculation of Cost of Goods Sold
Beginning inventory …………………………………
$ 6,000
Less: Purchases returns and allowances…….
Less ending inventory ………………………………
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Quick Study 4-26A (10 minutes) PERIODIC & GROSS
Nov. 5 Purchases ………………………………………………………….. 6,000
Accounts Payable ……………………………………….. 6,000
Quick Study 4-27A (10 minutes) PERIODIC & GROSS
Apr. 1 Accounts Receivable …………………………………………. 3,000
Sales ………………………………………………………….. 3,000
Record sale of goods.
Quick Study 4-28B (10 minutes)
a.
June 30 Sales Discounts …………………………………………………. 60
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-29B (10 minutes)
a.
June 30 Sales Returns and Allowances …………………………... 1,000
Quick Study 4-30C (10 minutes) NET & PERPETUAL
Nov. 5 Merchandise Inventory ………………………………………. 5,880
Accounts Payable ………………………………………. 5,880
Record credit purchase. 600 units x $10 x (100%-2%)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Quick Study 4-31C (10 minutes) NET & PERPETUAL
Apr. 1 Accounts Receivable ………………………………. 3,000
Sales ……………………………………………….. 3,000
Record sale of goods.
Apr. 1 Cost of Goods Sold …………………………………. 1,800
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
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EXERCISES
Exercise 4-1 (30 minutes)
Note: The original missing numbers are blocked and shaded.
(a)
(b)
(c)
(d)
(e)
Sales ……………………….
$62,000
$43,500
$55,000
$79,000
$25,600
Cost of goods sold
Merch. inv., beg. ……..
8,000
17,050
7,500
8,000
4,560
Total cost of merch.
Explanations:
a. Find merchandise inventory (ending) by subtracting cost of goods sold from goods
available for sale. Find gross profit as the difference between the sales and cost of
goods sold. Find net income as the gross profit less the expenses.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
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Exercise 4-2 (10 minutes)
Operating cycle of a merchandiser with credit sales follows (chronological):
2 (a) prepare merchandise for sale
Exercise 4-3 (30 minutes)
Apr. 2 Merchandise Inventory ………………………………. 4,600
Accounts Payable—Lyon …………………….. 4,600
Purchased merchandise on credit.
17 Accounts Payable—Lyon …………………………... 4,000
Merchandise Inventory ………………………… 80
Cash* ………………………………………………….. 3,920
Paid within discount period less returns.
*($4,600 – $600) x (100% – 2%)
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Exercise 4-4 (30 minutes)
Mar. 3 Merchandise Inventory ………………………………. 1,150
Accounts Payable—GreenWorld ………….. 1,150
Purchased merchandise on credit.
19 Merchandise Inventory …………………………..…. 425
Accounts Payable—PeopleFirst …………… 425
Purchased merchandise on credit.
21 Accounts Payable—PeopleFirst …………………. 25
Merchandise Inventory ……………………….. 25
Received an allowance on purchase.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-5 (20 minutes)
a.
Transaction
Sealy has Ownership?
1.
Yes
2.
Yes
3.
4.
b.
1. Merchandise Inventory ………………………………. 600
Cash …………………………………………………… 600
Purchased goods FOB shipping point.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-6 (30 minutes)
SELLER—Allied
May 3 Merchandise Inventory ………………………………. 20,000
Cash …………………………………………………… 20,000
Purchased goods (2,000 x $10).
May 7 Sales Returns and Allowances …………………… 1,750
Accounts Receivable …………………………... 1,750
Accepted returns (125 x $14).
7 Merchandise Inventory ………………………………. 1,250
Cost of Goods Sold …………………………….. 1,250
Returned goods to inventory (125 x $10).
Exercise 4-7 (20 minutes)
Income Statement Components
May 3
May 5
May 7
May 8
May 15
Sales ……………………………………
+21,000
+21,000
+15,000
____
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Chapter 4
Exercise 4-8 (15 minutes)
BUYER—Macy
May 3 No entry for buyer.
May 5 Merchandise Inventory ……………………………… 21,000
Accounts Payable ………………………………. 21,000