P5A-36A, cont.
Mar. 26
Sales Returns and Allowances
200
Accounts Receivable—Smecker
200
Cash ($600 – $12)
588
Sales Discounts ($600 × 0.02)
Accounts Receivable—Smecker ($800 – $200)
600
Cash
Accounts Receivable—Julian Company ($2,200 – $100)
P5A-37A Preparing a multi-step income statement and journalizing closing entries
Learning Objective 7
Appendix 5A
1. Gross Profit $200,200
Travis Department Store uses a periodic inventory system. The adjusted trial balance of Travis
Department Store at December 31, 2016, follows:
Requirements
1. Prepare Travis Department Store’s multi-step income statement for the year ended
December 31, 2016. Assume ending Merchandise Inventory is $36,500.
2. Journalize Travis Department Store’s closing entries.
SOLUTION
Requirement 1
TRAVIS DEPARTMENT STORE
Income Statement
Year Ended December 31, 2016
P5A-37A, cont.
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Dec. 31
Sales Revenue
387,000
Purchase Returns and Allowances
113,000
Purchase Discounts
6,700
Merchandise Inventory (ending)
36,500
Income Summary
543,200
Income Summary
414,400
294,000
Income Summary
128,800
128,800
Retained Earnings
89,500
Problems (Group B)
For all problems, assume the perpetual inventory system is used unless stated otherwise. Round all
numbers to the nearest whole dollar unless stated otherwise.
P5-38B Journalizing purchase and sale transactions
Learning Objectives 1, 2, 3
Feb. 12 Cash $5,586
Journalize the following transactions that occurred in February 2016 for Faucet. No explanations are
needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Feb. 3
Merchandise Inventory
3,500
Accounts Payable—Sidecki Wholesalers
3,500
4
Merchandise Inventory
Cash
4
Merchandise Inventory
2,200
2,200
6
Accounts Payable—Sidecki Wholesalers
Merchandise Inventory
8
Accounts Receivable—Harvey Company
5,700
Sales Revenue
5,700
Cost of Goods Sold
2,508
Merchandise Inventory
2,508
9
Merchandise Inventory
6,000
Accounts Payable—Teaton Wholesalers
6,000
10
Accounts Payable—Sidecki Wholesalers ($3,500 – $800)
2,700
Cash ($2,700 – $54)
2,646
Merchandise Inventory ($2,700 × 0.02)
54
12
Cash ($5,700 – $114)
5,586
Sales Discounts ($5,700 × 0.02)
Accounts Receivable—Harvey Company
5,700
13
Accounts Payable—Teaton Wholesalers
Merchandise Inventory
15
Accounts Receivable—Jackson Company
2,900
Sales Revenue
2,900
Cost of Goods Sold
1,276
Merchandise Inventory
1,276
22
Accounts Payable—Teaton Wholesalers ($6,000 – $100)
5,900
Cash
5,900
P5-38B, cont.
Feb. 23
Sales Returns and Allowances
500
Accounts Receivable—Jackson Company
500
Merchandise Inventory
220
Cost of Goods Sold
220
25
Accounts Receivable—Secker
2,085
Sales Revenue
2,000
Cash
85
Cost of Goods Sold
880
880
26
Sales Returns and Allowances
100
Accounts Receivable—Secker
100
27
Cash ($1,985 – $38)
1,947
Sales Discounts (($2,085 – $85 – $100) × 0.02)
38
Accounts Receivable—Secker ($2,085 – $100)
1,985
28
Cash
2,400
Accounts Receivable—Jackson Company ($2,900 – $500)
2,400
P5-39B Journalizing purchase and sale transactions
Learning Objectives 1, 2, 3
Jan. 14 Merch. Inv. $25
Journalize the following transactions that occurred in January 2016 for May’s Amusements. No
explanations are needed. Identify each accounts payable and accounts receivable with the vendor or
customer name.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Jan. 4
Merchandise Inventory
5,000
Accounts Payable—Vanderbilt Company
5,000
6
Merchandise Inventory
150
Cash
150
8
Accounts Payable—Vanderbilt Company
2,500
Merchandise Inventory ($5,000 × 0.50)
2,500
10
Cash
1,100
Sales Revenue
1,100
Cost of Goods Sold
440
Merchandise Inventory
440
11
Accounts Receivable—Gilmore Corporation
Sales Revenue
Cost of Goods Sold
5,555
Merchandise Inventory
5,555
12
Delivery Expense
30
Cash
30
13
Accounts Receivable—Cadet Company
8,800
Sales Revenue
8,800
Cost of Goods Sold
4,400
Merchandise Inventory
4,400
14
Accounts Payable—Vanderbilt Company ($5,000 – $2,500)
2,500
Cash ($2,500 – $25)
2,475
Merchandise Inventory ($2,500 × 0.01)
25
16
Sales Returns and Allowances
800
Accounts Receivable—Gilmore Corporation
800
17
Sales Returns and Allowances
400
Accounts Receivable—Cadet Company
400
Merchandise Inventory
200
Cost of Goods Sold
200
P5-39B, cont.
Jan. 18
Merchandise Inventory
4,600
Accounts Payable—Roberts Corporation
4,600
20
Cash ($9,300 – $279)
9,021
Sales Discounts ($9,300 × 0.03)
279
Accounts Receivable—Gilmore Corporation ($10,100 – $800)
9,300
26
Accounts Payable—Roberts Corporation
4,600
Cash ($4,600 – $46)
4,554
Merchandise Inventory ($4,600 × 0.01)
28
Cash ($8,400 – $252)
8,148
Sales Discounts ($8,400 × 0.03)
252
Accounts Receivable—Cadet Company ($8,800 – $400)
8,400
29
Merchandise Inventory
Cash
Merchandise Inventory
240
Cash
P5-40B Preparing a multi-step income statement, journalizing closing entries, and preparing a
post-closing trial balance
Learning Objectives 4, 5
1. Operating Income $62,600
The adjusted trial balance of Rachel Rey Dance Company at April 30, 2016, follows:
Requirements
1. Prepare Rachel Rey’s multi-step income statement for the year ended April 30, 2016.
2. Journalize Rachel Rey’s closing entries.
3. Prepare a post-closing trial balance as of April 30, 2016.
SOLUTION
Requirement 1
RACHAEL REY DANCE COMPANY
Income Statement
Year Ended April 30, 2016
Sales Revenue
$ 180,000
Less: Sales Returns and Allowances
6,000
Sales Discounts
2,500
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Operating Income
Other Revenues and (Expenses):
Net Income
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Apr. 30
Sales Revenue
180,000
Income Summary
180,000
Income Summary
118,700
Income Summary
Retained Earnings
P5-40B, cont.
Requirement 3
RACHAEL REY DANCE COMPANY
Post-Closing Trial Balance
April 30, 2016
Account Title
Balance
Debit
Credit
Cash
$ 3,700
Accounts Receivable
38,100
Merchandise Inventory
17,600
Office Supplies
Furniture
39,800
Accumulated Depreciation—Furniture
Accounts Payable
Salaries Payable
Unearned Revenue
Notes Payable, long-term
Common Stock
Retained Earnings
Total
P5-41B Journalizing adjusting entries, preparing adjusted trial balance, and preparing financial
statements
Learning Objectives 4, 5
2. Total Credits $490,410
The unadjusted trial balance for Thomas Electronics Company follows:
Requirements
1. Journalize the adjusting entries using the following data:
a. Interest revenue accrued, $300.
b. Salaries (Selling) accrued, $2,400.
c. Depreciation Expense—Equipment (Administrative), $1,310.
d. Interest expense accrued, $1,300.
e. A physical count of inventory was completed. The ending Merchandise Inventory should have a
balance of $44,900.
2. Prepare Thomas Electronics’s adjusted trial balance as of October 31, 2016.
3. Prepare Thomas Electronics’s multi-step income statement for year ended October 31, 2016.
4. Prepare Thomas Electronics’s statement of retained earnings for year ended October 31, 2016.
5. Prepare Thomas Electronics’s classified balance sheet in report form as of October 31, 2016.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Oct. 31
Interest Receivable
300
Interest Revenue
300
Salaries Expense (Selling)
Depreciation Expense—Equipment (Administrative)
Interest Expense
Cost of Goods Sold
700
700
P5-41B, cont.
Requirement 2
THOMAS ELECTRONICS COMPANY
Adjusted Trial Balance
October 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 4,400
Accounts Receivable
Interest Receivable
Merchandise Inventory
Office Supplies
Equipment
Accumulated Depreciation—Equipment
Accounts Payable
15,800
Salaries Payable
2,400
Interest Payable
1,300
Unearned Revenue
13,700
Notes Payable, long-term
47,000
Common Stock
45,000
Retained Earnings
15,700
Dividends
Sales Revenue
Interest Revenue
Sales Returns and Allowances
Sales Discounts
Cost of Goods Sold
Salaries Expense (Selling)
Rent Expense (Selling)
Salaries Expense (Administrative)
Utilities Expense (Administrative)
Depreciation Expense—Equipment (Administrative)
Interest Expense
Total
P5-41B, cont.
Requirement 3
THOMAS ELECTRONICS COMPANY
Income Statement
Year Ended October 31, 2016
Sales Revenue
$ 310,000
Less: Sales Returns and Allowances
5,500
Sales Discounts
4,000
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses:
Salaries Expense
27,400
Rent Expense
15,300
Total Selling Expenses
42,700
Administrative Expenses:
Salaries Expense
4,900
Utilities Expense
11,000
Depreciation Expense—Equipment
1,310
Total Administrative Expenses
17,210
Total Operating Expenses
Operating Income
Other Revenues and (Expenses):
Interest Revenue
Interest Expense
Total Other Revenues and (Expenses)
Net Income
Requirement 4
THOMAS ELECTRONICS COMPANY
Statement of Retained Earnings
Year Ended October 31, 2016
Retained Earnings, November 1, 2015
$ 15,700
Net income for the year
68,390
$ 84,090
Dividends
Retained Earnings, October 31, 2016
$ 57,090
P5-41B, cont.
Requirement 5
THOMAS ELECTRONICS COMPANY
Balance Sheet
October 31, 2016
Assets
$ 4,400
$ 90,500
(39,210)
91,790
$ 182,290
Liabilities
$ 15,800
47,000
80,200
45,000
57,090
$ 182,290
P5-42B Preparing a single-step income statement, preparing a multi-step income statement, and
computing the gross profit percentage
Learning Objectives 5, 6
2. Operating Income $96,595
The records of Farm Fresh Beef Company list the following selected accounts for the quarter ended
September 30, 2016:
Requirements
1. Prepare a single-step income statement.
2. Prepare a multi-step income statement.
3. J. Douglas, manager of the company, strives to earn a gross profit percentage of at least 50%. Did
Farm Fresh Beef achieve this goal? Show your calculations.
SOLUTION
Requirement 1
FARM FRESH BEEF COMPANY
Income Statement
Quarter Ended September 30, 2016
Revenues:
Net Sales Revenue
$ 305,000
Interest Revenue
Total Revenues
Rent Expense (Selling)
Utilities Expense (Selling)
Delivery Expense (Selling)
Depreciation Expense—Equipment (Administrative)
Utilities Expense (Administrative)
Rent Expense (Administrative)
Interest Expense
Total Expenses