CHAPTER 5
Accounting for Merchandising Operations
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
A
Problems
*1. Describe merchandising
operations and inventory
systems.
2, 3, 4
1, 2
1
perpetual inventory system.
inventory system.
*4. Apply the steps in the
1, 12, 13,
6, 7
4
6, 7, 8
3A, 4A, 5A
15, 16, 17,
5
6, 9, 10, 12,
2A, 3A, 5A,
*6. Prepare a worksheet for
11
15, 16
*7. Record purchases and sales
system.
22, 23
12, 13, 14,
17, 18, 19,
20, 21, 22
6A, 7A, 8A
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Journalize purchase and sales transactions under
a perpetual inventory system.
Simple
20–30
Journalize, post, and prepare a partial income statement.
closing entries.
Journalize, post, and prepare a trial balance.
Determine cost of goods sold and gross profit under
40–50
Calculate missing amounts and assess profitability.
income statement using periodic approach.
WEYGANDT FINANCIAL AND MANAGERIAL ACCOUNTING 2E
CHAPTER 5
ACCOUNTING FOR MERCHANDISING OPERATIONS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
AP
Simple
4–6
BE2
1
AP
Simple
4–6
BE3
2, 3
AP
Simple
2–4
BE4
3
AP
Simple
6–8
BE5
2
AP
Simple
6–8
BE6
4
AP
Simple
1–2
BE7
4
AP
Simple
2–4
BE8
5
AP
Simple
2–4
BE9
5
Simple
4–6
BE10
5
AP
Simple
4–6
*BE11
6
Simple
2–4
*BE12
7
AP
Simple
4–6
*BE13
7
AP
Simple
4–6
*BE14
7
AP
Simple
3–5
*BE15
7
AP
Simple
6–8
*BE16
7
AP
Simple
4–6
DI1
1
AP
Simple
2–4
DI2
2
AP
Simple
2–4
DI3
3
AP
Simple
4–6
DI4
4
AP
Simple
4–6
DI5
5
AP
Simple
10–12
EX1
1
Simple
3–5
EX2
2
AP
Simple
EX3
2, 3
AP
Simple
EX4
2, 3
AP
Simple
EX5
3
AP
Simple
EX6
4, 5
AP
Simple
6–8
EX7
4
AP
Simple
6–8
EX8
4
AP
Simple
EX9
5
AP
Simple
EX10
5
AP
Simple
ACCOUNTING FOR MERCHANDISING OPERATIONS (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX12
5
AP
Simple
8–10
EX13
5
AN
Simple
6–8
EX14
5
AN
Moderate
8–10
P1A
2, 3
AP
Simple
20–30
P2A
2, 3, 5
AP
Simple
30–40
P3A
4, 5
AN
Moderate
40–50
P4A
2–4
AP
Simple
30–40
P5A
4–6
AP
Moderate
50–60
P6A
5, 7
AP
Moderate
40–50
P7A
5, 7
Moderate
20–30
*P8A
7
AP
Simple
30–40
5
Simple
10–15
5
Simple
15–20
5
Simple
15–20
AP
Simple
10–15
5
Moderate
20–30
3
Simple
10–15
2
Simple
10–15
Simple
5–10
AP
Moderate
10–15
*EX15
6
AP
Simple
2–4
*EX16
6
AP
Simple
8–10
*EX17
7
AP
Simple
6–8
7
AP
Simple
8–10
7
AN
Moderate
10–12
7
AP
Simple
8–10
*EX21
7
AP
Simple
8–10
*EX22
7
AP
Simple
6–8
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Describe merchandising
operations and inventory
systems.
Q5-2
Q5-3
Q5-4
DI5-1
E5-1
DI5-1
BE5-1
BE5-2
2. Record purchases under a
perpetual inventory system.
Q5-5
Q5-6
Q5-7
Q5-8
BE5-3
BE5-5
DI5-2
E5-2
E5-3
E5-4
P5–1A
P5–2A
P5–4A
E5–11
BE5-4
E5-3
P5–4A
a merchandising company.
BE5-11
E5–16
P5–5A
E5–20
E5–21
E5–22
Decision Making Across
Ethics Case
ANSWERS TO QUESTIONS
1. (a) Disagree. The steps in the accounting cycle are the same for both a merchandising company
and a service company.
(b) The measurement of income is conceptually the same. In both types of companies, net
income (or loss) results from the matching of expenses with revenues.
4. Income measurement for a merchandising company differs from a service company as follows:
(a) sales are the primary source of revenue and (b) expenses are divided into two main
categories: cost of goods sold and operating expenses.
5. In a perpetual inventory system, cost of goods sold is determined each time a sale occurs.
Questions Chapter 5 (Continued)
Accounts Receivable ($900 – $100) ………………………… 800
12. The perpetual inventory records for merchandise inventory may be incorrect due to a variety of
causes such as recording errors, theft, or waste.
13. Two closing entries are required:
Questions Chapter 5 (Continued)
*18. (a) The operating activities part of the income statement has three sections: sales revenues,
cost of goods sold, and operating expenses.
*22.
Accounts
Added/Deducted
Purchase Returns and Allowances
Purchase Discounts
Freight-In
Deducted
Deducted
Added
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 5-1
BRIEF EXERCISE 5-2
BRIEF EXERCISE 5-3
BRIEF EXERCISE 5-4
BRIEF EXERCISE 5-5
BRIEF EXERCISE 5-6
Inventory ……………………………………………………. 2,300
BRIEF EXERCISE 5-7
BRIEF EXERCISE 5-8
BRIEF EXERCISE 5-9
BRIEF EXERCISE 5-9 (Continued)
(2) Single-Step Income Statement
BRIEF EXERCISE 5-10
*BRIEF EXERCISE 5-11
*BRIEF EXERCISE 5-12
*BRIEF EXERCISE 5-13
*BRIEF EXERCISE 5-14
*BRIEF EXERCISE 5-15
*BRIEF EXERCISE 5-16
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 5-1
DO IT! 5-2
DO IT! 5-3
DO IT! 5-4
DO IT! 5-5
SOLUTIONS TO EXERCISES
EXERCISE 5-1
EXERCISE 5-2
EXERCISE 5-3
EXERCISE 5-4
EXERCISE 5-4 (Continued)
EXERCISE 5-5
EXERCISE 5-6
(a) TSAI COMPANY
Income Statement (Partial)
For the Year Ended October 31, 2017
EXERCISE 5-7
EXERCISE 5-8
EXERCISE 5-9
(a) FURLOW COMPANY
Income Statement
For the Month Ended March 31, 2017
EXERCISE 5-10
(a) LEMERE COMPANY
Income Statement
For the Year Ended December 31, 2017
(b) LEMERE COMPANY
Income Statement
For the Year Ended December 31, 2017
EXERCISE 5-11
EXERCISE 5-12
EXERCISE 5-13
EXERCISE 5-14
(*Missing amount)
EXERCISE 5-14 (Continued)
*EXERCISE 5-15
Accounts
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
Sales Discounts
*EXERCISE 5-16
MARQUEZ COMPANY
Worksheet
For the Month Ended June 30, 2017
*EXERCISE 5-17
*EXERCISE 5-18
*EXERCISE 5-19
*EXERCISE 5-20
*EXERCISE 5-21
*EXERCISE 5-22
Accounts
Adjusted
Trial Balance
Income
Statement
Balance
Sheet
PROBLEM 5-1A
PROBLEM 5-1A (Continued)
PROBLEM 5-2A
(a)
General Journal J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
Accounts Payable ………………..
Inventory ……………………………..
Inventory ……………………………..
Accounts Receivable ……………
PROBLEM 5-2A (Continued)
General Journal J1
PROBLEM 5-2A (Continued)
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
Accounts Receivable No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 5-2A (Continued)
Supplies No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
Sales Revenue No. 401
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Debit
Balance
Date
Explanation
Ref.
Debit
Date
Explanation
Debit
Credit
Balance
PROBLEM 5-2A (Continued)
Cost of Goods Sold No. 505
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 5-3A
(a) THE DELUXE STORE
Income Statement
For the Year Ended November 30, 2017
PROBLEM 5-3A (Continued)
THE DELUXE STORE
Retained Earnings Statement
For the Year Ended November 30, 2017
PROBLEM 5-3A (Continued)
THE DELUXE STORE
Balance Sheet (Continued)
November 30, 2017
PROBLEM 5-3A (Continued)
PROBLEM 5-4A
(a)
General Journal J1
Date
Account Titles and Explanation
Ref.
Credit
PROBLEM 5-4A (Continued)
J1
Date
Account Titles and Explanation
Ref.
Debit
Credit
(b)
Cash No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
Accounts Receivable …………..
PROBLEM 5-4A (Continued)
Accounts Payable No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
Common Stock No. 311
Date
Explanation
Ref.
Debit
Credit
Balance
Date
Explanation
Ref.
Debit
Credit
Balance
PROBLEM 5-4A (Continued)
(c) ADAM’S DISCORAMA
Trial Balance
April 30, 2017
(a) VALDEZ FASHION CENTER
Worksheet
For the Year Ended November 30, 2017
Adjusted
Income
Key: (a) Store supplies used, (b) Depreciation expense—equipment, (c) Accrued interest payable, (d) Adjustment of inventory.
*PROBLEM 5-5A (Continued)
(b) VALDEZ FASHION CENTER
Income Statement
For the Year Ended November 30, 2017
*PROBLEM 5-5A (Continued)
VALDEZ FASHION CENTER
Retained Earnings Statement
For the Year Ended November 30, 2017
VALDEZ FASHION CENTER
Balance Sheet
November 30, 2017
*PROBLEM 5-5A (Continued)
VALDEZ FASHION CENTER
Balance Sheet (Continued)
November 30, 2017
*PROBLEM 5-5A (Continued)
*PROBLEM 5-5A (Continued)
(e) VALDEZ FASHION CENTER
Post-Closing Trial Balance
November 30, 2017
*PROBLEM 5-6A
DAYTON DEPARTMENT STORE
Income Statement (Partial)
For the Year Ended November 30, 2017
*PROBLEM 5-7A
*PROBLEM 5-7A (Continued)
*PROBLEM 5-8A
(a)
General Journal
Date
Account Titles and Explanation
Debit
Credit
Accounts Payable …………………………...
1,200
Cash ………………………………………………
Purchase Returns and Allowances …..
Sales Revenue ………………………………..
600
Accounts Payable …………………………...
450
Cash ($400 – $4) ……………………………..
396
Accounts Receivable ………………………
Accounts Receivable ………………………
*PROBLEM 5-8A (Continued)
(b)
Cash
Sales Revenue
4/30 Bal. 35
4/1 Bal. 4,000
4/12 450
*PROBLEM 5-8A (Continued)
(c) KOKOTT PRO SHOP
Trial Balance
April 30, 2017
(d) KOKOTT PRO SHOP
Income Statement (Partial)
For the Month Ended April 30, 2017
COMPREHENSIVE PROBLEM SOLUTION
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(b) & (c) General Ledger
Cash
12/23 180
12/15 2,000
12/1 Bal. 22,000
12/31 Bal. 2,400
12/31 Bal. 4,500
12/31 Bal. 800
Salaries and Wages Payable …………….
Equipment …………………………………….
Supplies ($3,200 – $1,500) ………………..
COMPREHENSIVE PROBLEM SOLUTION (Continued)
Common Stock
Cost of Goods Sold
COMPREHENSIVE PROBLEM SOLUTION (Continued)
(d) PROSEN DISTRIBUTING COMPANY
Adjusted Trial Balance
December 31, 2017
(e) PROSEN DISTRIBUTING COMPANY
Income Statement
For the Month Ending December 31, 2017
COMPREHENSIVE PROBLEM SOLUTION (Continued)
PROSEN DISTRIBUTING COMPANY
Retained Earnings Statement
For the Month Ended December 31, 2017
PROSEN DISTRIBUTING COMPANY
Balance Sheet
December 31, 2017
BYP 5-1 FINANCIAL REPORTING PROBLEM
2012
2013
2013 ($170,910 – $106,606) ÷ $170,910
2013 ($37,037 ÷ $170,910)
BYP 5-2 COMPARATIVE ANALYSIS PROBLEM
PepsiCo
Coca-Cola
BYP 5-3 COMPARATIVE ANALYSIS PROBLEM
Amazon
Wal-Mart
BYP 5-4 REAL-WORLD FOCUS
BYP 5-5 DECISION MAKING ACROSS THE ORGANIZATION
(a) (1) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
(2) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
BYP 5-5 (Continued)
(c) FAMILY DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2017
BYP 5-6 COMMUNICATION ACTIVITY
(a), (b)
President
Surfing USA Co.
Dear Sir:
BYP 5-7 ETHICS CASE
(a) Jacquie Boynton, as a new employee, is placed in a position of res-
(c) Jacquie’s alternatives:
BYP 5-8 ALL ABOUT YOU
BYP 5-9 FASB CODIFICATION ACTIVITY
(a) (1) Inventory is the aggregate of those items of tangible personal
(2) A customer is a reseller or a consumer, either an individual or a
BYP 5-9 (Continued)
IFRS EXERCISES
IFRS5-1
IFRS5-2
IFRS5-3
MATILDA COMPANY
Comprehensive Income Statement
For the Year Ended 2017
INTERNATIONAL FINANCIAL REPORTING PROBLEM
IFRS5-4