1. Merchandising businesses acquire merchandise for resale to customers. It is the selling of
2. Yes. Gross profit is the excess of (net) sales over cost of merchandise sold. A net loss arises
4. a. 1% discount allowed if paid within 15 days of date of invoice; entire amount of invoice
6. a. A credit memo issued by the seller of merchandise indicates the amount for which the
b
uyer’s account is to be credited (credit to Accounts Receivable) and the reason for the
p
r
8. Examples of such accounts include the following: Sales, Sales Discounts, Sales Returns and
CHAPTER 6
ACCOUNTING FOR MERCHANDISING BUSINESSES
DISCUSSION QUESTIONS
6-1
CHAPTER 6 Accounting for Merchandising Businesses
PE 6–1A
PE 6–1B
PE 6–2A
PE 6–2B
PE 6–3A
a. Accounts Receivable 41,100
PE 6–3B
a. Accounts Receivable 92,500
PRACTICE EXERCISES
CHAPTER 6 Accounting for Merchandising Businesses
PE 6–4A
a. $161,400. Purchase of $180,000 less return of $20,000 less the discount of
PE 6–4B
a. $31,680. Purchase of $36,000 less return of $4,000 less the discount of
PE 6–5A
Sundance Co. journal entries:
Cash ($16,800 – $3,800 – $260) 12,740
PE 6–5B
Shore Co. journal entries:
Cash ($112,000 – $2,240 + $1,800) 111,560
6-3
CHAPTER 6 Accounting for Merchandising Businesses
PE 6–6A
PE 6–6B
PE 6–7A
a. 2014 2013
PE 6–7B
a. 2014 2013
6-4
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–1
Ex. 6–2
Ex. 6–3
Ex. 6–4
The offer of Supplier Two is lower than the offer of Supplier One. Details are as follows:
Supplier One Supplier Two
List price $100,000 $99,750
Ex. 6–5
(1) Purchased merchandise on account at a cost of $21,000.
EXERCISES
6-5
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–6
a. Merchandise Inventory 60,000
Ex. 6–7
a. Merchandise Inventory 71,500
6-6
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–8
a. Cash 45,000
Sales 45,000
d. Cash 100,000
Ex. 6–9
It was acceptable to debit Sales for the $55,000. However, using Sales Returns
and Allowances assists management in monitoring the amount of returns so that
quick action can be taken if returns become excessive.
6-7
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–10
Ex. 6–11
Ex. 6–12
a. $24,000
6-8
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–14
a. Accounts Receivable—Belarus Co. 64,300
Sales 64,300
6-9
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–16
Balance Sheet Accounts Income Statement Accounts
100 Assets 400 Revenues
110 Cash 410 Sales
200 Liabilities Expense
210 Accounts Payable 530 Office Salaries Expense
6-10
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–17
a. At the time of sale
Ex. 6–18
a. Accounts Receivable 23,730
6-11
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–20
a. Net sales: $6,865,000 ($8,135,000 – $795,000 – $475,000)
Ex. 6–21
Ex. 6–22
a. $20,250 ($525,000 – $41,350 – $463,400)
6-12
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–23
a.
Revenue from sales:
FOLDAWAY FURNISHINGS COMPANY
Income Statement
For the Year Ended February 28, 2014
6-13
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–24
A correct income statement would be as follows:
Revenue from sales:
Sales $9,132,000
CURBSTONE COMPANY
Income Statement
For the Year Ended August 31, 2014
6-14
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–25
Revenues:
Net sales $3,750,000
Ex. 6–26
Cost of Merchandise Sold 14,450
CUMMERBUND COMPANY
Income Statement
For the Year Ended June 30, 2014
6-15
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–28
2014
Feb. 28 Sales 2,850,000
Ex. 6–29
2014
Oct. 31 Sales 1,375,000
Income Summary 1,375,000
Closing Entries
Closing Entries
6-16
CHAPTER 6 Accounting for Merchandising Businesses
Ex. 6–30
Ex. 6–31
Appendix Ex. 6–32
6-17
CHAPTER 6 Accounting for Merchandising Businesses
Appendix Ex. 6–33
a. Cost of merchandise sold:
Merchandise inventory, May 1, 2013 $ 380,000
Appendix Ex. 6–34
Cost of merchandise sold:
Merchandise inventory, November 1 $ 28,000
6-18
CHAPTER 6 Accounting for Merchandising Businesses
Appendix Ex. 6–35
Cost of merchandise sold:
Merchandise inventory, July 1 $ 190,850
Appendix Ex. 6–36
A correct cost of merchandise sold section is as follows:
Cost of merchandise sold:
Merchandise inventory, June 1, 2013 $ 91,300
6-19
CHAPTER 6 Accounting for Merchandising Businesses
Appendix Ex. 6–37
(a) credit
Appendix Ex. 6–38
Jan. 2 Purchases 18,200
Accounts Payable 18,200
6-20