CHAPTER 6 Accounting for Merchandising Businesses
Appendix 2 Ex. 6-40
20Y6
Cost of Merchandise Sold 150,000
Appendix 2 Ex. 6-41
20Y3
Dec. 31 Sales 140,400
Customer Refunds Payable 140,400
($7,800,000 × 1.8%)
Cost of Merchandise Sold 90,000
Appendix 2 Ex. 6-42
a. 20Y1
Dec. 31 Sales 180,000
Customer Refunds Payable 180,000
($12,000,000 × 1.5%)
b. 20Y2
Feb. 15 Customer Refunds Payable 8,000
Cash 8,000
15 Merchandise Inventory 5,500
Estimated Returns Inventory 5,500
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Ex. 6-43
(a) credit
(b) debit
(c) debit
Appendix 3 Ex. 6-44
Jan. 2 Purchases 18,200
Accounts Payable 18,200
13 Accounts Receivable [$37,300 – ($37,300 × 1%)] 36,927
Sales 36,927
15 Delivery Expense 215
Cash 215
Accounts Receivable 36,927
*[($18,200 – $2,750) × 2%]
Appendix 3 Ex. 6-45
a. Purchases discounts, Purchases returns and allowances
b. Freight in
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Ex. 6-46
a. Cost of merchandise sold:
Merchandise inventory, May 1, 20Y6 $ 380,000
Cost of merchandise purchased:
Purchases $3,800,000
Purchases returns and allowances (150,000)
Purchases discounts (80,000)
b. $2,310,000 ($5,850,000 – $3,540,000)
c. No. Gross profit would be the same if the perpetual inventory system was used.
Appendix 3 Ex. 6-47
Cost of merchandise sold:
Merchandise inventory, November 1 $ 28,000
Cost of merchandise purchased:
Purchases $475,000
Purchases returns and allowances (15,000)
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Ex. 6-48
Cost of merchandise sold:
Merchandise inventory, July 1 $ 190,850
Cost of merchandise purchased:
Purchases $1,126,000
Purchases returns and allowances (46,000)
Purchases discounts (23,000)
Appendix 3 Ex. 6-49
1. The schedule should begin with the June 1, 20Y3, not the May 31, 20Y4,
merchandise inventory.
2. Purchases returns and allowances and purchases discounts should be deducted
from (not added to) purchases.
A corrected schedule would appear as follows:
Cost of merchandise sold:
Merchandise inventory, June 1, 20Y3 $ 91,300
Cost of merchandise purchased:
Purchases $1,110,000
Purchases returns and allowances (55,000)
Purchases discounts (30,000)
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Ex. 6-50
Dec. 31 Merchandise Inventory (December 31) 480,000
Sales 2,220,000
Purchases Discounts 35,000
Purchases Returns and Allowances 45,000
Merchandise Inventory (January 1) 375,000
Purchases 1,760,000
Closing Entries
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-1A
Oct. 1 Merchandise Inventory 14,448
Accounts Payable—UK Imports Co. 14,448
6 Accounts Payable—Taco Co. 4,459
Merchandise Inventory 4,459
[$4,550 – ($4,550 × 2%)]
13 Accounts Payable—Hoagie Co. 9,971
Cash 9,971
19 Merchandise Inventory 400
Cash 400
20 Merchandise Inventory 21,780
Accounts Payable—Caesar Salad Co. 21,780
[$22,000 – ($22,000 × 1%)]
PROBLEMS
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-2A
Mar. 2 Accounts Receivable—Equinox Co. 18,711
Sales 18,711
[$18,900 – ($18,900 × 1%)]
3 Cost of Merchandise Sold 7,000
Merchandise Inventory 7,000
4 Accounts Receivable—Empire Co. 55,400
Sales 55,400
5 Cost of Merchandise Sold 19,400
Merchandise Inventory 19,400
12 Cash 18,711
Accounts Receivable—Equinox Co. 18,711
14 Cash 13,700
Sales 13,700
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-2A (Concluded)
Mar. 18 Customer Refunds Payable 1,000
Accounts Receivable—Targhee Co. 1,000
19 Cost of Merchandise Sold 5,000
Merchandise Inventory 5,000
31 Cash 55,400
Accounts Receivable—Empire Co. 55,400
31 Delivery Expense 5,600
Cash 5,600
Cash 6,544
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-3A
Nov. 3 Merchandise Inventory 88,200
Accounts Payable—Moonlight Co. 88,200
[$120,000 – ($120,000 × 25%)] = $90,000
[$90,000 – ($90,000 × 2%)]
5 Merchandise Inventory 67,202
Accounts Payable—Papoose Creek Co. 67,202
[$67,400 – ($67,400 × 2%) + $1,150]
8 Cost of Merchandise Sold 13,000
Merchandise Inventory 13,000
13 Accounts Payable—Moonlight Co. 69,384
Cash 69,384
($88,200 – $18,816)
14 Cash 335,000
Sales 335,000
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-3A (Concluded)
Nov. 24 Accounts Receivable—Rabel Co. 79,992
Sales 79,992
[$80,800 – ($80,800 × 1%)]
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-4A
1.
Aug. 1 Accounts Receivable—Beartooth Co. 47,040
Sales 47,040
[$48,000 – ($48,000 × 2%)]
5 Accounts Receivable—Beartooth Co. 66,000
Sales 66,000
5 Cost of Merchandise Sold 40,000
Merchandise Inventory 40,000
15 Cost of Merchandise Sold 35,000
Merchandise Inventory 35,000
16 Cash 47,040
Accounts Receivable—Beartooth Co. 47,040
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-4A (Concluded)
2.
Aug. 1 Merchandise Inventory 47,040
Accounts Payable—Summit Company 47,040
15 Merchandise Inventory 59,788
Accounts Payable—Summit Company 59,788
{[$58,700 – ($58,700 × 1%)] + $1,675}
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-5A
1.
Sales $13,746,000
Cost of merchandise sold 9,513,000
Gross profit $ 4,233,000
Expenses:
Selling expenses:
Total selling expenses $1,992,400
Administrative expenses:
Office salaries expense $ 787,700
Rent expense 113,900
Depreciation expense—office
equipment 60,600
2.
Kristina Marble, capital, June 1, 20Y7 $4,179,800
Net income for the year $1,143,100
Withdrawals (121,200)
Druid Hills Co.
Statement of Owner’s Equity
For the Year Ended May 31, 20Y8
Druid Hills Co.
Income Statement
For the Year Ended May 31, 20Y8
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-5A (Concluded)
3.
Current assets:
Cash $ 290,800
Accounts receivable 1,170,600
Merchandise inventory 2,075,300
Store equipment $4,362,700
Less accumulated depreciation 2,205,600 2,157,100
Total property, plant, and equipment 2,496,400
Total assets $6,059,200
Current liabilities:
Accounts payable $ 395,100
Customer refunds payable 48,500
Salaries payable 50,300
4. The multiple-step form of income statement contains various sections for revenues
and expenses, with intermediate balances, and concludes with net income. In the
single-step form, the total of all expenses is deducted from the total of all revenues.
There are no intermediate balances.
Druid Hills Co.
Balance Sheet
May 31, 20Y8
Assets
Liabilities
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-6A
1.
Sales $13,746,000
Expenses:
Cost of merchandise sold $9,513,000
2. 20Y8
May 31 Sales 13,746,000
Cost of Merchandise Sold 9,513,000
Sales Salaries Expense 1,110,100
Advertising Expense 666,500
Depreciation Expense—Store Equipment 169,700
Miscellaneous Selling Expense 46,100
Office Salaries Expense 787,700
Rent Expense 113,900
Depreciation Expense—Office Equipment 60,600
Closing Entries
Druid Hills Co.
Income Statement
For the Year Ended May 31, 20Y8
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Prob. 6-7A
Oct. 1 Purchases 14,448
Accounts Payable—UK Imports Co. 14,448
6 Accounts Payable—Taco Co. 4,550
Purchases Returns and Allowances 4,550
13 Accounts Payable—Hoagie Co. 10,170
Cash 9,971
Purchases Discounts ($9,950 × 2%) 199
19 Freight In 400
Cash 400
20 Purchases 22,000
Accounts Payable—Caesar Salad Co. 22,000
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Prob. 6-8A
Nov. 3 Purchases 90,000
Accounts Payable—Moonlight Co. 90,000
[$120,000 – ($120,000 × 25%)]
8 Accounts Receivable—Quinn Co. 22,100
Sales 22,100
13 Accounts Payable—Moonlight Co. 70,800
Cash 69,384
Purchases Discounts 1,416
23 Cash 22,100
Accounts Receivable—Quinn Co. 22,100
24 Accounts Receivable—Rabel Co. 79,992
Sales 79,992
[$80,800 – ($80,800 × 1%)]
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Prob. 6-9A
1. Wyman Company uses a periodic inventory system because it maintains accounts
for purchases, purchases returns and allowances, purchases discounts, and
freight in.
2.
Sales $3,280,000
Cost of merchandise sold:
Merchandise inventory, January 1, 20Y6 $ 257,000
Cost of merchandise purchased:
Freight in 48,000
Total cost of merchandise purchased 2,568,000
Merchandise available for sale $2,825,000
Merchandise inventory, December 31, 20Y6 (335,000)
Cost of merchandise sold 2,490,000
Gross profit $ 790,000
Expenses:
Miscellaneous selling expense 12,000
Total selling expenses $ 372,000
Administrative expenses:
Office salaries expense $ 175,000
Rent expense 28,000
Insurance expense 3,000
Office supplies expense 2,000
Depreciation expense—office equipment 1,500
Miscellaneous administrative expense 3,500
Total administrative expenses 213,000
Wyman Company
Income Statement
For the Year Ended December 31, 20Y6
CHAPTER 6 Accounting for Merchandising Businesses
Appendix 3 Prob. 6-9A (Concluded)
3.
Dec. 31 Merchandise Inventory (December 31) 335,000
Sales 3,280,000
Delivery Expense 9,000
Depreciation Expense—Store Equipment 6,000
Miscellaneous Selling Expense 12,000
Office Salaries Expense 175,000
Rent Expense 28,000
Insurance Expense 3,000
4. $210,000, the same net income as under the periodic inventory system
Closing Entries
CHAPTER 6 Accounting for Merchandising Businesses
Prob. 6-1B
Mar. 1 Merchandise Inventory 43,035
Accounts Payable—Haas Co. 43,035
[$43,250 – ($43,250 × 2%)] + $650
13 Merchandise Inventory 15,239
Accounts Payable—Jost Co. 15,239
[$15,550 – ($15,550 × 2%)]
14 Accounts Payable—Jost Co. 3,675
Merchandise Inventory 3,675
[$3,750 – ($3,750 × 2%)]
19 Merchandise Inventory 6,370
Accounts Payable—Bickle Co. 6,370
[$6,500 – ($6,500 × 2%)]
23 Accounts Payable—Jost Co. ($15,239 – $3,675) 11,564
Cash 11,564