1.
= $ 5,000 + + +
= $14,000
40
Chapter 5, SE 3.
Days to sell inventory
Chapter 5, SE 2.
Financial ratios computed
d
THE OPERATING CYCLE AND
MERCHANDISING OPERATIONS
Chapter 5, SE 1.
Current Assets $6,000$2,000 $1,000
CHAPTER 5—Solutions
252
–=
×=
–=
8/10 970 8/3 105
Less 40 percent trade discount
1,150
List price
8/7 180
8/2
$2,075
$41.50
$425
T accounts set up and entries posted
$2,033.50
$2,500
$2,075
$2,075
Merchandise value:
Discount:
Payment:
Cash
$41.50
Chapter 5, SE 6.
Accounts Payable Freight-In
Chapter 5, SE 5.
2%
Chapter 5, SE 4.
$12,000
4,800
*
253
8/10 970 8/3 105
*
5/10 1,455 5/3 158
Bal.** 1,455 5/10 1,455 5/3 158 Bal. 158
Chapter 5, SE 8.
Accounts Payable Freight-In
T accounts set up and entries posted
Cash
5/7 270 5/2 1,725
T accounts set up and entries posted
$1,150 – $180 = $970
Cash
Chapter 5, SE 7.
Accounts Payable Freight-In
8/7 8/2 1,150180
*
*
254
5/10 1,455 158
Bal.** 1,455 5/10 1,455 5/3 158
1,725 1,883
Bal. 158
*
**
$282,900
Cost of goods sold
Merchandise inventory, September 30, 2011
Purchases
$ 37,950
Freight-In
Chapter 5, SE 10.
5/7 5/2 1,725270 5/3
158Bal.
Chapter 5, SE 9.
Accounts Payable
T accounts set up and entries posted
The balance of Cash is a credit because there are no data about the beginning
Cash
balance and only one entry has been posted to the credit side of the account.
$1,725 – $270 = $1,455
*
255
8/4 2,520 8/5 231
*
f
d
$2,520 – $735 = $1,785
1.
2.
Chapter 5, SE 12.
8/4 8/9 7352,520
Chapter 5, SE 11.
Accounts Receivable Delivery ExpenseSales
T accounts set up and entries posted
d
Chapter 5, SE 13.
1.
1.
1.
1.
d
pay its suppliers.
Chapter 5, E 3.
for a very short time, if its sales are mostly for cash, or if it has long terms to
Chapter 5, E 1.
The balance would be wrong if an error were made in updating the account or
if merchandise had been lost or stolen.
Chapter 5, E 2.
Yes, a company can have a negative financing period if its merchandise is held
257
€150,000 × $1.00 =
$ 1,200
10,080
$61,160
$12,000
13,280
$25,600
$61,160
$35,560
$5,000
Chapter 5, E 6.
List price
=Current Ratio ==
2. Current ratio computed
Current Assets
Cash
Marketable Securities
Current Liabilities
Notes Payable (90 days)
Accounts Payable
Chapter 5, E 5.
1. Working capital computed
Chapter 5, E 4.
Current Liabilities
Cost of machine in dollars:
Current Assets
Working Capital
1.72
$150,000
Date of purchase:
258
1 2,000
2,000
10 1,176
24
1,200
11 3,200
3,200
31 3,200
terms 2/10, n/30, FOB shipping point
Sales
Sold merchandise on credit to Sun Company,
Received payment from Sun Company for the
Accounts Receivable
Cash
Sales Discounts
Accounts Receivable
Chapter 5, E 7.
Sold merchandise on credit to Sun Company,
terms 2/10, n/30, FOB shipping point
Cash
Mar. Accounts Receivable
Sales
259
2 2,000
2,000
$2,000 – $250 =
14 2,250
2,250
Merchandise Inventory
Accounts Payable
Purchased merchandise on credit from Lucas
Accounts Payable:
July
Chapter 5, E 8.
Purchased merchandise on credit from Lucas
$1,750
Merchandise Inventory
Accounts Payable
$249,000
65,000
$ 22,900
6,000
Income Statement
For the Year Ended December 31, 2011
Net sales
Sales
Total operating expenses
Income before income taxes
Income taxes
Chapter 5, E 9.
Parties, Etc.
Bal. —
5,000
Merchandise Inventory
e.
1,000
T accounts set up and entries posted
Cash
a.
Chapter 5, E 10.
Accounts Payable Freight-In
2,000 6/15 2,600
2,000 Bal. 2,600
*
**
the account.
$2,600 – $600 = $2,000
The balance of Merchandise Inventory is a credit because there are no data about
the beginning balance and a larger amount has been posted to the credit side of
Chapter 5, E 11.
Sales
T accounts set up and entries posted
Accounts Receivable and Allowances
Sales Returns
Cash
6/25
Bal.
*
263
$154,500
3,500
$53,900
2,800
18,600
46,800
$ 39,900
Net sales
General and administrative expenses
Less purchases returns and allowances
Total operating expenses
Net purchases
Freight-in
Chapter 5, E 12.
Handy General Store
Sales
Income before income taxes
Income Statement
For the Year Ended December 31, 2011
31 28 (j) 17
28 (s) 29 22
189 170 (k) 144 (d)
222 212 182
Cost of goods available for sale
Net cost of purchases
2011
Chapter 5, E 13.
2009
Freight-in
(in thousands)
Purchases returns and allowances
2010
b. 270 e. 1,000 a. 5,000 a. 5,000
f. 5,000 f. 5,000 c. 2,800 c. 2,800
d. 4,800
h.* 1,800 h. 1,800 Bal. #####
5,200 d. 5,200g.
g.
Chapter 5, E 14.
Accounts Payable PurchasesCash
T accounts set up and entries posted
5,200
2,000 6/15 2,600
2,000 Bal. 2,600
T accounts set up and entries posted
6/25
Chapter 5, E 15.
Sales
Cash
Bal.
*
267
1.
2.
3.
1.
g
Chapter 5, E 18.
b
The 30 percent increase represents about one additional employee on the pay-
end probably means that to meet sales goals, the sales staff inflated the pre-
Chapter 5, E 16.
All other things being equal, a decrease in both gross margin and ending in-
roll (after accounting for the raises). It is possible that the branch office mana-
The large increase in sales returns and allowances immediately following year-
Chapter 5, E 17.
268
127,400
$192,600
Leonid’s Delivery, Inc.
Income Statement
For the Year Ended August 31, 2011
$338,000
2,350
1,600
$65,650
Store salaries expense
Selling expenses
Rent expense
Insurance expense
Office supplies expense
Depreciation expense—office equipment
Total general and administrative
Net sales
Sales
Utilities expense
40,020
4,800
2,400
3,120
Cost of goods sold*
Gross margin
Operating expenses
Multistep income statement prepared1.
Chapter 5, P 1.
expenses
269
Chapter 5, P 1. (Continued)
(3) in relation to other information.
net sales of $320,000. This is a profit margin of 8.4 percent.
User Insight: Income statement discussed
First, overall, the statement shows net income of $26,870, which was earned on
2.
Second, the components of gross margin and operating expenses can be examined.
1 1,050
1,050
5 145
145
8 1,700
100
1,800
15 360
360
1. Transactions recorded
FOB shipping point
Sold merchandise to Tina Lands, terms n/30,
Freight-In
To transfer cost of merchandise sold to
Merchandise Inventory
Accounts Payable
Paid shipping charges to Team Freight
Cost of Goods Sold account
Cash
Freight-In
Sales
2011
July
Chapter 5, P 2.
Accounts Receivable
FOB shipping point
Cost of Goods Sold
Merchandise Inventory