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
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses:
3,400
Administrative Expenses:
1,305
4,300
9,000
Total Operating Expenses
Operating Income
Other Revenues and (Expenses):
Interest Revenue
Interest Expense
Total Other Revenues and (Expenses)
Net Income
Requirement 3
Farm Fresh Beef Company did not achieve the goal of a gross profit percentage of 50%; it was only
48%.
Net Sales Revenue
$ 305,000
Less: Cost of Goods Sold
158,600
Gross Profit
$ 146,400
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
4
Purchases
1,300
Cash
1,300
6
Accounts Payable—Shue Wholesalers
500
Purchase Returns and Allowances
500
8
Accounts Receivable—Herman Company
3,800
Sales Revenue
3,800
9
Purchases
4,700
Accounts Payable—Tex Wholesalers
4,700
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
15
Accounts Receivable—Jeter Company
1,800
Sales Revenue
1,800
22
Accounts Payable—Tex Wholesalers ($4,700 – $500)
4,200
Cash
4,200
23
Sales Returns and Allowances
100
Accounts Receivable—Jeter Company
100
25
Accounts Receivable—Small
600
Sales Revenue
600
P5A-43B, cont.
Jun. 26
Sales Returns and Allowances
200
Accounts Receivable—Small
200
Cash ($400 – $8)
392
Sales Discounts ($400 × 0.02)
Accounts Receivable—Small ($600 – $200)
400
Cash
Accounts Receivable—Jeter Company ($1,800 – $100)
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
Sales Discounts
4,300
Net Sales Revenue
Cost of Goods Sold:
Beginning Merchandise Inventory
37,300
Purchases
$ 290,000
Less: Purchase Returns & Allowances
Plus: Freight In
Net Cost of Purchases
Cost of Goods Available for Sale
Less: Ending Merchandise Inventory
36,700
Cost of Goods Sold
175,300
Gross Profit
209,000
Operating Expenses:
Selling Expenses
42,300
Administrative Expenses
26,800
Total Operating Expenses
69,100
Operating Income
Other Revenues and (Expenses):
Interest Expense
Total Other Revenues and (Expenses)
Net Income
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
Income Summary
411,100
Sales Returns and Allowances
Sales Discounts
Purchases
290,000
Freight In
Merchandise Inventory (beginning)
37,300
Selling Expense
42,300
Administrative Expense
26,800
Interest Expense
Income Summary
136,600
Retained Earnings
136,600
Retained Earnings
88,700
Dividends
88,700
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
Prepaid Rent
2,400
Cash
2,400
Software Inventory ($1,050 + $50)
1,100
Accounts Payable
1,100
18
Accounts Receivable
2,625
Sales Revenue
2,625
Cost of Goods Sold
880
Software Inventory
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
22
Software Inventory
4,810
Accounts Payable
4,810
24
Utilities Expense
375
Cash
28
Cash
5,265
Sales Revenue
5,265
Cost of Goods Sold
3,470
Software Inventory
3,470
P5-45, cont.
Jan. 31
Salaries Expense
775
Salaries Payable
775
Depreciation Expense—Equipment
Depreciation Expense—Furniture
Accumulated Depr.—Furniture
Rent Expense
800
800
Cost of Goods Sold
260
260
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
Accounts Receivable
Jan. 20 685
685 Bal.
Jan. 18 2,625
775 Jan. 31
Jan. 19 2,500
775 Bal.
Unearned Revenue
880 Jan. 18
1,800 Bal.
Jan. 7 1,100
3,470 Jan. 28
1,800 Bal.
Jan. 22 4,810
260 Jan. 31
20,000 Bal.
20,000 Bal.
2,225 Bal.
2,225 Bal.
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
Bal. 3,600
Bal. 3,600
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.
50 Bal.
50 Jan. 31
100 Bal.
Jan. 20 1,200
Bal. 375
Bal. 60
P5-45
Requirements 1 and 2, cont.
Bal. 800
Requirement 3
DANIELS CONSULTING
Income Statement
Month Ended January 31, 2017
Sales Revenue
$ 7,890
Less: Cost of Goods Sold
4,610
Gross Profit
3,280
Service Revenue
8,200
Operating Expenses:
Total Operating Expenses:
3,260
Net Income
$ 8,220
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
31
Income Summary
7,870
Cost of Goods Sold
4,610
Rent Expense
800
Utilities Expense
375
Salaries Expense
1,975
Depr. Expense—Equipment
Depr. Expense—Furniture
31
Income Summary
8,220
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
Bal. 3,600
Jan. 20 685
685 Bal.
Jan. 18 2,625
775 Jan. 31
Jan. 19 2,500
775 Bal.
Bal. 8,725
Bal. 0
880 Jan. 18
1,800 Bal.
Jan. 7 1,100
3,470 Jan. 28
1,800 Bal.
Jan. 22 4,810
260 Jan. 31
Bal. 1,300
20,000 Bal.
20,000 Bal.
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
Bal. 3,600
16,090 Clo. 1
Bal. 3,600
8,220 Bal.
0 Bal.
Accumulated Depr.—Equipment
60 Bal.
5,700 Jan. 2
60 Jan. 31
2,500 Jan. 19
120 Bal.
8,200 Bal.
0 Bal.
P5-45
Requirement 4, cont.
50 Bal.
Jan. 18 880
50 Jan. 31
Jan. 28 3,470
100 Bal.
Jan. 31 260
Bal. 4,610
Bal. 0
Jan. 31 60
60 Clo. 2
Bal. 0
Jan. 31 50
50 Clo. 2
Bal. 0
800 Clo. 2
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
Accounts Receivable
Software Inventory
Office Supplies
Prepaid Rent
Equipment
Accumulated Depreciation—Equipment
Furniture
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
Sales Revenue
$ 7,890
Cost of Goods Sold
(4,610)
Gross Profit
$ 3,280
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
Merchandise Inventory
4,500
Accounts Payable—Borax
4,500
Accounts Payable—Sparkle, Co.
450
Merchandise Inventory
450
Accounts Payable—Borax
4,500
Cash ($4,500 − $87)
4,413
Merchandise Inventory [($4,500 – $150) × 0.02]
87
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
Merchandise Inventory
132
Cost of Goods Sold
132
21
Cash
3,572
Sales Discounts ($3,682 × 0.03)
110
Accounts Receivable—Happy Maids ($3,990 – $308)
3,682
28
Cash
3,975
Sales Revenue
3,975
Cost of Goods Sold
1,691
Merchandise Inventory
1,691
P5-46
Requirements 2 and 3, cont.
Dec. 29
Utilities Expense
415
Cash
415
30
Sales Commission Expense
550
Cash
550
Dec. 31
Cost of Goods Sold
324
Merchandise Inventory
324
31
Depreciation Expense—Equipment and Truck
270
Accumulated Depreciation—Equipment and Truck
270
31
Salaries Expense
725
Salaries Payable
725
31
Insurance Expense
150
Prepaid Insurance
150
31
Rent Expense
500
Prepaid Rent
500
31
Interest Expense ($96,000 × 0.09 × 1/12)
720
Interest Payable
720
31
Unearned Revenue
Service Revenue
1,000