PROBLEM 5-2C (Continued)
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
May 1
9
10
11
Balance
J1
J1
J1
4,455
8,232
900
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
May 2
J1
4,500
4,500
Inventory No. 120
Date
Explanation
Ref.
Debit
Credit
Balance
May 1
2
5
10
J1
J1
J1
J1
9,000
3,100
600
168
9,000
5,900
5,300
5,132
PROBLEM 5-2C (Continued)
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
May 11
J1
900
900
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
May 1
5
J1
J1
600
9,000
9,000
8,400
Owner’s Capital No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
May 1
Balance
10,000
Sales Revenue No. 401
Date
Explanation
Ref.
Debit
Credit
Balance
May 2
J1
4,500
4,500
Sales Returns and Allowances No. 412
Date
Explanation
Ref.
Debit
Credit
Balance
May 29
J1
100
100
Sales Discounts No. 414
Date
Explanation
Ref.
Debit
Credit
Balance
May 9
J1
45
45
PROBLEM 5-2C (Continued)
Cost of Goods Sold No. 505
Date
Explanation
Ref.
Debit
Credit
Balance
May 2
J1
3,100
3,100
(c) BLUESTEM HARDWARE STORE
Income Statement (Partial)
For the Month Ended May 31, 2017
Sales revenues
Sales revenue …………………………………………….. $12,800
Less: Sales returns and allowances ……………. $100
PROBLEM 5-3C
(a) LONG DEPARTMENT STORE
Income Statement
For the Year Ended November 30, 2017
Sales revenues
Sales revenue ……………………………… $850,000
Less: Sales returns & allowances … 10,000
Operating expenses
Salaries and wages expense ………… $120,000
Rent expense ………………………………. 19,000
Sales commissions expense ………… 14,000
Total oper. expenses ……………… 197,800
Income from operations……………………… 8,980
Other revenues and gains
LONG DEPARTMENT STORE
Owner’s Equity Statement
For the Year Ended November 30, 2017
Owner’s Capital December 1, 2016 ………………………………………… $84,200
Add: Net income ……………………………………………………….………… 5,980
PROBLEM 5-3C (Continued)
LONG DEPARTMENT STORE
Balance Sheet
November 30, 2017
Assets
Current assets
Cash …………………………………………… $ 8,000
Accounts receivable ……………………. 11,770
Inventory …………………………..……….. 36,200
Property, plant, and equipment
Equipment ………………………………….. 182,000
Liabilities and Owner’s Equity
Current liabilities
Accounts payable ……………………………………………… $47,310
Sales commissions payable ………………………………. 6,000
Property taxes payable………………………………………. 3,500
Total current liabilities ………………………………… $ 56,810
PROBLEM 5-3C (Continued)
(b) Nov. 30 Depr. Expense …………………………………. 13,500
Accumulated Depreciation—
Equipment …………………………….. 13,500
(c) Nov. 30 Sales ……………………………………………….. 850,000
Interest Revenue ……………………………… 5,000
Income Summary ………………………. 855,000
30 Income Summary …………………………….. 849,020
Sales Returns and
Allowances ……………………………. 10,000
Cost of Goods Sold …………………… 633,220
Salaries and Wages Expense …….. 120,000
30 Income Summary …………………………….. 5,980
Owner’s Capital ………………………… 5,980
PROBLEM 5-4C
(a)
General Journal J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
Apr. 5
Inventory ………………………………………
Accounts Payable …………………..
120
201
1,500
1,500
7
Inventory ………………………………………
120
80
Inventory ……………………………….
120
100
10
Accounts Receivable …………………….
Sales Revenue ……………………….
Cost of Goods Sold ……………………….
Inventory ……………………………….
112
401
505
120
1,100
810
1,100
810
12
Inventory ………………………………………
Accounts Payable …………………..
120
201
860
860
17
Accounts Payable …………………………
Inventory ……………………………….
201
120
60
60
20
Cash ……………………………………..
Accounts Receivable …………………….
Sales Revenue ……………………….
112
401
700
700
PROBLEM 5-4C (Continued)
J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
Apr. 27
Sales Returns and Allowances ……
Accounts Receivable …………..
412
112
40
40
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 1
7
Balance
J1
80
2,500
2,420
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 10
20
J1
J1
1,100
700
1,100
1,800
Inventory No. 120
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 1
5
7
9
10
Balance
J1
J1
J1
J1
1,500
80
100
810
3,500
5,000
5,080
4,980
4,170
PROBLEM 5-4C (Continued)
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 5
9
12
J1
J1
J1
100
1,500
860
1,500
1,400
2,260
Owner’s Capital No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 1
Balance
6,000
Sales Revenue No. 401
Date
Explanation
Ref.
Debit
Credit
Balance
Sales Returns and Allowances No. 412
Date
Explanation
Ref.
Debit
Credit
Balance
Apr. 27
J1
40
40
Cost of Goods Sold No. 505
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 5-4C (Continued)
(c) PHIL’S PRO SHOP
Trial Balance
April 30, 2017
Debit
Credit
$7,800
Cash ……………………………………………………………..
Accounts Receivable ………………………………………
Inventory ……………………………………………………….
$1,256
760
4,444
PROBLEM 5-5C
HAMMOND DEPARTMENT STORE
Income Statement (Partial)
For the Year Ended November 30, 2017
Sales revenues
Sales revenue ……………………… $900,000
Less: Sales returns and
allowances ………………… 20,000
Net sales …………………………….. 880,000
Cost of goods sold
Inventory, Dec. 1, 2016 …………. $ 44,360
PROBLEM 5-6C
(a) (a) Cost of goods sold = Sales – Gross profit
= $96,850 – $69,640 = $27,210
(d) Cash payments to suppliers = 2014 Accounts payable +
Purchases – 2015 Accounts payable
= $5,800 + $28,890 – $6,500 = $28,190
(e) Sales = Cost of goods sold + Gross profit
= $25,140 + $63,540 = $88,680
(h) Cash payments to suppliers = 2015 Accounts payable +
Purchases – 2013 Accounts Payable
= $6,500 + $31,160 [from (g)] – $4,600
= $33,060
(i) Gross profit = Sales – CGS
= $81,220 – $25,990 = $55,230
(j) Net income = Gross profit – Operating expenses
= $55,230 [from (i)] – $52,060 = $3,170
PROBLEM 5-6C (Continued)
(b) A decline in sales does not necessarily mean that profitability declined.
Profitability is affected by sales, cost of goods sold, and operating
expenses. If cost of goods sold or operating expenses decline more
than sales, profitability can increase even when sales decline. However,
in this particular case, sales declined with insufficient offsetting cost
savings to improve profitability. Therefore, profitability declined for
Agvilar Inc.
2015
2016
2017
Gross profit rate
$69,640 ÷ $96,850
= 72%
$63,540 ÷ $88,680
= 72%
$55,230 ÷ $81,220
= 68%
*PROBLEM 5-7C
(a) General Journal
Date
Account Titles and Explanation
Debit
Credit
Apr. 5
Purchases ……………………………………………..
Accounts Payable …………………………...
2,700
2,700
7
Freight-in ………………………………………………
Cash ………………………………………………
80
80
9
Accounts Payable ………………………………….
Purchase Returns and Allowances …..
200
10
Accounts Receivable …………………………..…
Sales Revenue ………………………………..
950
12
Purchases ……………………………………………..
Accounts Payable …………………………...
460
460
14
Accounts Payable ($2,700 – $200) ……………
Purchase Discounts ($2,500 X 2%) …..
Cash ($2,500 – $50) …………………………
2,500
50
2,450
17
Accounts Payable ………………………………….
Purchase Returns and Allowances …..
20
Accounts Receivable …………………………..…
Sales Revenue ………………………………..
1,400
1,400
21
Accounts Payable ($460 – $60) ……………….
Purchase Discounts ($400 X 1%) ………
Cash ($400 – $4) ……………………………..
400
4
396
27
Sales Returns and Allowances ……………….
75
30
Cash ……………………………………………………..
1,100
*PROBLEM 5-7C (Continued)
(b)
Cash
Owner’s Capital
4/1 Bal. 2,500
4/30 1,100
4/7 80
4/14 2,450
4/21 396
4/1 Bal. 6,000
4/30 Bal. 6,000
4/30 Bal. 674
Sales Revenue
4/10 950
4/27 75
4/30 Bal. 2,350
4/30 Bal. 1,175
4/10 950
4/27 75
Inventory
4/30 Bal. 75
4/1 Bal. 3,500
4/30 Bal. 3,500
Purchases
4/30 Bal. 3,160
4/5 2,700
4/17 60
Freight-in
4/21 400
4/7 80
4/30 Bal. 0
4/30 Bal. 80
Purchase
Returns and Allowances
4/30 Bal. 260
4/30 Bal. 54
4/9 200
*PROBLEM 5-7C (Continued)
(c) MOLINA PRO SHOP
Trial Balance
April 30, 2017
Debit
Credit
Cash …………………………………………………………….
Accounts Receivable …………………………………….
Sales Returns and Allowances ……………………….
Purchases …………………………………………………….
$ 674
1,175
75
3,160
MOLINA PRO SHOP
Income Statement (Partial)
For the Month Ended April 30, 2017
Sales revenues
Sales revenue ………………………….. $2,350
Less: Sales returns and
Purchases ……………………………….. $3,160
Less: Purchase returns
and allowances ……………… $260
Purchase discounts ……….. 54 314