Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 5
Chapter 5
Accounting for Merchandising
Operations
QUESTIONS
1. Merchandising companies report Merchandise Inventory on the balance sheet,
2. Additional accounts of a merchandising company likely include Merchandise
3. A company can have a net loss if its expenses (absent cost of goods sold) are
4. A cash discount can be offered to encourage customers to promptly pay. This
5. For a perpetual inventory system, inventory shrinkage is determined by taking a
6. Cash discounts are granted in return for early payment and reduce the amount paid
below the negotiated price. Cash discounts are recorded in the accounting records
7. Sales discount is a term used by a seller to describe a cash discount granted to a
8. A manager is concerned about the quantity of its purchase returns because the
9. The sender (maker) of a debit memorandum records a debit in an account of the
292
10. The single-step income statement format presents cost of goods sold and expenses
in one list, totals the list, and subtracts the total from net sales in one step. The
12. Google titles its cost of goods sold account as “Cost of revenues.”
QUICK STUDIES
Quick Study 5-1 (10 minutes)
1. G. 6. H.
Quick Study 5-2 (5 minutes)
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Quick Study 5-3 (15 minutes)
a. (i) Computation of goods available for sale
Beginning inventory ……………………………………………. $5,000
Quick Study 5-4 (15 minutes)
Payment Computations
Quick Study 5-5 (15 minutes)
Nov. 5 Merchandise Inventory ………………………………. 6,000
Accounts Payable ………………………………. 6,000
Quick Study 5-6 (10 minutes)
a)
Aug. 1 Merchandise Inventory ………………………………………. 60,000
Quick Study 5-7 (10 minutes)
a)
Sep. 15 Merchandise Inventory ………………………………………. 35,000
Quick Study 5-8 (15 minutes)
Apr. 1 Accounts Receivable ………………………………………… 3,000
Quick Study 5-9 (10 minutes)
July 31 Cost of Goods Sold ……………………………… 1,900
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Quick Study 5-10 (10 minutes)
July 31 Sales …………………………………………………….. 160,200
Income Summary …………………………... 160,200
Quick Study 5-11 (10 minutes)
1. a
Quick Study 5-12 (10 minutes)
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Quick Study 5-13 (10 minutes)
Similarities: Both the acid-test ratio and current ratio are used to assess
liquidity. Both ratios are computed with current liabilities as the denominator.
Quick Study 5-14 (10 minutes)
(a)
(b)
(c)
(d)
Sales ……………………………………..
$150,000
$550,000
$38,700
$255,700
Sales discounts ……………………..
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Quick Study 5-15 (20 minutes)
1. Multiple-step income statement
adidas Group
Income Statement (€ millions)
For Year Ended December 31, 2014
Net sales ……………………………………………………………. €14,534
2. Single-step income statement
adidas Group
Income Statement (€ millions)
For Year Ended December 31, 2014
Revenues
Net sales ………………………………………………………… €14,534
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Quick Study 5-16A (5 minutes)
a. Periodic inventory system
Quick Study 5-17A (10 minutes) PERIODIC & GROSS
Nov. 5 Purchases ………………………………………………………….. 6,000
Accounts Payable ……………………………………….. 6,000
Quick Study 5-18A (10 minutes) PERIODIC & GROSS
Apr. 1 Accounts Receivable …………………………………………. 3,000
300
Quick Study 5-19 C (10 minutes)
a.
June 30 Sales Discounts …………………………………………………. 60
Quick Study 5-20C (10 minutes)
a.
June 30 Sales Returns and Allowances …………………………... 1,000
Quick Study 5-21D (10 minutes) NET & PERPETUAL
Nov. 5 Merchandise Inventory ………………………………………. 5,880
Quick Study 5-22D (10 minutes) NET & PERPETUAL
Apr. 1 Accounts Receivable ………………………………. 3,000
Sales ……………………………………………….. 3,000
Record sale of goods.
Quick Study 5-23 (10 minutes)
a. Both U.S. GAAP and IFRS include broad and similar guidance for the
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 5
EXERCISES
Exercise 5-1 (30 minutes)
Note: The original missing numbers are blocked.
(a)
(b)
(c)
(d)
(e)
Sales ……………………….
$62,000
$43,500
$46,000
$79,000
$25,600
Cost of goods sold
Merch. inv. (beg.) …….
Total cost of merch.
Merch. inv. (end.) …….
(11,950)
(9,000)
(6,600)
Expenses …………………
10,000
10,650
12,150
3,600
6,000
Net income (loss) ……..
$17,950
$16,850
$ (8,400)
$42,000
$12,600
Explanations:
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Exercise 5-2 (10 minutes)
Operating cycle of a merchandiser with credit sales follows (chronological):
2 (a) prepare merchandise for sale
Exercise 5-3 (30 minutes)
Apr. 2 Merchandise Inventory …………………………..….. 4,600
Accounts Payable—Lyon …………………….. 4,600
Purchased merchandise on credit.
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Exercise 5-4 (30 minutes)
SELLER—Allied
May 3 Merchandise Inventory …………………………..….. 20,000
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Exercise 5-5 (15 minutes)
BUYER—Macy
May 3 No entry for buyer.
May 5 Merchandise Inventory …………………………..…. 21,000
Accounts Payable ………………………………. 21,000
Exercise 5-6 (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
Exercise 5-7 (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
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Exercise 5-8 (30 minutes)
Merchandise Inventory
Balance, Dec. 31, 2016 …………..
25,000
Purchase discounts received …………………………..
1,700
Shrinkage ……………………………………………………….
Exercise 5-9 (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
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Exercise 5-10 (25 minutes)
Adjusting entries
Dec. 31 Sales Salaries Expense …………………………….. 1,700
Salaries Payable…………………………………. 1,700
Closing entries
Dec. 31 Sales …………………………………………………….. 529,000
Income Summary …………………………….. 529,000
Close temporary accounts with credit
balances.