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P5-42B, cont.
Requirement 2
FARM FRESH BEEF COMPANY
Income Statement
Quarter Ended September 30, 2016
Sales Revenue
$ 317,800
Less: Sales Returns and Allowances
8,300
Sales Discounts
4,500
Requirement 3
Farm Fresh Beef Company did not achieve the goal of a gross profit percentage of 50%; it was only
48%.
P5A-43B Journalizing purchase and sale transactions—periodic inventory system
Learning Objective 7
Appendix 5A
Jun. 10 Purchase Discount $120
Journalize the following transactions that occurred in June 2016 for Dixie Company. Assume Dixie uses
the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts
receivable with the vendor or customer name.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Jun. 3
Purchases
4,500
Accounts Payable—Shue Wholesalers
4,500
4
Freight-In
75
Cash
75
10
Accounts Payable—Shue Wholesalers ($4,500 – $500)
4,000
Cash ($4,000 – $120)
3,880
Purchase Discounts ($4,000 × 0.03)
120
12
Cash ($3,800 – $114)
3,686
Sales Discounts ($3,800 × 0.03)
114
Accounts Receivable—Herman Company
3,800
13
Accounts Payable—Tex Wholesalers
500
Purchase Returns and Allowances
500
P5A-43B, cont.
Jun. 26
Sales Returns and Allowances
200
Accounts Receivable—Small
200
P5A-44B Preparing a multi-step income statement and journalizing closing entries
Learning Objective 7
Appendix 5A
1. Gross Profit $209,000
Tilton Department Store uses a periodic inventory system. The adjusted trial balance of Tilton
Department Store at December 31, 2016, follows:
Requirements
1. Prepare Tilton Department Store’s multi-step income statement for the year ended December 31,
2016. Assume ending Merchandise Inventory is $36,700.
2. Journalize Tilton Department Store’s closing entries.
SOLUTION
Requirement 1
TILTON DEPARTMENT STORE
Income Statement
Year Ended December 31, 2016
Sales Revenue
$ 395,000
Less: Sales Returns and Allowances
6,400
Gross Profit
209,000
Operating Expenses:
Selling Expenses
42,300
Administrative Expenses
26,800
Total Operating Expenses
69,100
P5A-44B, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Sales Revenue
395,000
Purchase Returns and Allowances
109,000
Purchase Discounts
7,000
Merchandise Inventory (ending)
36,700
Income Summary
547,700
Continuing Problem
P5-45 Journalizing purchase and sale transactions, making closing entries, preparing financial
statements, and computing the gross profit percentage
This problem continues the Daniels Consulting situation from Problem P4-40 of Chapter 4. Daniels
Consulting performs systems consulting. The company has also begun selling accounting software and
uses the perpetual inventory system to account for software inventory. During January, Daniels
Consulting completed the following transactions:
Requirements
1. Open the following T-accounts in the ledger: Cash, $17,950; Accounts Receivable,
$3,600; Software Inventory, $0; Office Supplies, $300; Prepaid Rent, $0; Equipment, $3,600;
Accumulated Depreciation—Equipment, $60; Furniture, $3,000; Accumulated Depreciation—
Furniture, $50; Accounts Payable, $3,600; Unearned Revenue, $1,800; Salaries Payable, $685;
Common Stock, $20,000; Retained Earnings, $2,255; Dividends, $0; Income Summary, $0; Service
Revenue, $0; Sales Revenue, $0; Cost of Goods Sold, $0; Salaries Expense, $0; Rent Expense, $0;
Utilities Expense, $0; Depreciation Expense—Equipment, $0; and Depreciation Expense—
Furniture, $0.
SOLUTION
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Jan. 2
Cash
5,700
Service Revenue
5,700
19
Accounts Receivable
2,500
Service Revenue
2,500
20
Salaries Payable
685
Salaries Expense
1,200
Cash
1,885
21
Accounts Payable
1,100
Cash
1,100
P5-45, cont.
Jan. 31
Salaries Expense
775
Salaries Payable
775
Requirements 1 and 2
Cash
Accounts Payable
Bal. 17,950
2,400 Jan. 2
Jan. 21 1,100
3,600 Bal.
Jan. 2 5,700
1,885 Jan. 20
1,100 Jan. 7
Jan. 28 5,265
1,100 Jan. 21
4,810 Jan. 22
375 Jan. 24
8,410 Bal.
Bal . 23,155
P5-45
Requirements 1 and 2, cont.
Prepaid Rent
Dividends
Bal. 0
Bal. 0
Jan. 2 2,400
800 Jan. 31
Bal. 0
Bal. 1,600
Accumulated Depr.—Equipment
Service Revenue
60 Bal.
5,700 Jan. 2
60 Jan. 31
2,500 Jan. 19
120 Bal.
8,200 Bal.
Furniture
Sales Revenue
Bal. 3,000
2,625 Jan. 18
Bal. 3,000
5,265 Jan. 28
7,890 Bal.
P5-45
Requirements 1 and 2, cont.
Requirement 3
DANIELS CONSULTING
Income Statement
Month Ended January 31, 2017
Sales Revenue
$ 7,890
Less: Cost of Goods Sold
4,610
P5-45
Requirement 4
DATE
ACCOUNTS AND EXPLANATIONS
POST.
REF.
DEBIT
CREDIT
Closing Entries
Jan.
31
Service Revenue
8,200
Sales Revenue
7,890
Income Summary
16,090
Retained Earnings
8,220
P5-45
Requirement 4, cont.
Cash
Accounts Payable
Bal. 17,950
2,400 Jan. 2
Jan. 21 1,100
3,600 Bal.
Jan. 2 5,700
1,885 Jan. 20
1,100 Jan. 7
Jan. 28 5,265
1,100 Jan. 21
4,810 Jan. 22
375 Jan. 24
8,410 Bal.
Bal . 23,155
Office Supplies
Retained Earnings
Bal. 300
2,255 Bal.
Bal. 300
8,220 Clo. 3
10,475 Bal.
Prepaid Rent
Dividends
Bal. 0
Bal. 0
Jan. 2 2,400
800 Jan. 31
Bal. 0
Bal. 1,600
P5-45
Requirement 4, cont.
Furniture
Sales Revenue
Bal. 3,000
2,625 Jan. 18
Bal. 3,000
5,265 Jan. 28
Clo. 1 7,890
7,890 Bal.
0 Bal.
Salaries Expense
Jan. 20 1,200
Jan. 31 775
Bal. 1,975
1,975 Clo. 2
Bal. 0
Utilities Expense
Jan. 24 375
375 Clo. 2
Bal. 0
P5-45
Requirement 4, cont.
Daniels Consulting
Post-Closing Trial Balance
January 31, 2017
Account Title
Balance
Debit
Credit
Cash
$ 23,155
Accumulated Depreciation—Furniture
100
Accounts Payable
8,410
Salaries Payable
775
Unearned Revenue
1,800
Common Stock
20,000
Retained Earnings
10,475
Total
$ 41,680
$ 41,680
Requirement 5
Practice Set
This problem continues the Crystal Clear Cleaning practice set begun in Chapter 2 and continued
through Chapters 3 and 4.
P5-46 Journalizing purchase and sale transactions, making closing entries, preparing financial
statements, and computing the gross profit percentage
Crystal Clear Cleaning has decided that, in addition to providing cleaning services, it will sell cleaning
products. Crystal Clear uses the perpetual inventory system. During December 2017, Crystal Clear
completed the following transactions:
Requirements
1. Open the following T-accounts in the ledger: Cash, $138,150; Accounts Receivable,
$2,600; Merchandise Inventory, $0; Cleaning Supplies, $30; Prepaid Rent, $1,500; Prepaid
2. Journalize and post the December transactions. Compute each account balance, and denote the
balance as Bal. Identify each accounts payable and accounts receivable with the vendor or customer
name.
3. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. Compute each
account balance, and denote the balance as Bal. After posting all adjusting entries, prove the equality
SOLUTION
Requirements 2 and 3
Date
Accounts and Explanation
Debit
Credit
Dec. 2
Merchandise Inventory
2,850
Accounts Payable—Sparkle, Co.
2,850
11
Accounts Receivable—Happy Maids
3,990
Sales Revenue
3,990
Cost of Goods Sold
1,710
Merchandise Inventory
1,710
12
Accounts Payable—Sparkle, Co. ($2,850 – $450)
2,400
Cash ($2,400 – $72)
2,328
Merchandise Inventory ($2,400 × 0.03)
72
15
Sales Returns and Allowances
308
Accounts Receivable—Happy Maids
308
P5-46
Requirements 2 and 3, cont.
Dec. 29
Utilities Expense
415
Cash
415
30
Sales Commission Expense
550
Cash
550
31
Salaries Expense
725
Salaries Payable
725
31
Insurance Expense
150
Prepaid Insurance
150
