SOLUTION
Requirement a
Sales Revenue
$ 172,000
Less: Sales Discounts
7,000
Sales Returns & Allowances
14,000
Net Sales Revenue
$ 151,000
Requirement b
Beginning Merchandise Inventory
$ 16,500
Purchases
$ 90,000
Less: Purchase Returns and Allowances
Purchase Discounts
Net Purchases
Plus: Freight In
Net Cost of Purchases
Cost of Goods Available for Sale
Less: Ending Inventory
Cost of Goods Sold
$ 78,500
Requirement c
Net Sales Revenue
$ 151,000
Less: Cost of Goods Sold
78,500
Gross Profit
$ 72,500
Problems (Group A)
For all problems, assume the perpetual inventory system is used unless stated otherwise. Round all
numbers to the nearest whole dollar unless stated otherwise.
P5-31A Journalizing purchase and sale transactions
Learning Objectives 1, 2, 3
Sep. 10 Cash $2,871
Journalize the following transactions that occurred in September 2016 for Cardinal. No explanations are
needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Sep. 3
Merchandise Inventory
4,000
Accounts Payable—Sherry Wholesalers
4,000
Merchandise Inventory
Cash
Merchandise Inventory
1,900
1,900
Accounts Payable—Sherry Wholesalers
1,100
Merchandise Inventory
1,100
Accounts Receivable—Houston Company
5,500
Sales Revenue
5,500
Cost of Goods Sold
2,365
2,365
Merchandise Inventory
Accounts Payable—Tarin Wholesalers
10
Accounts Payable—Sherry Wholesalers ($4,000 – $1,100)
2,900
Cash ($2,900 – $29)
2,871
Merchandise Inventory ($2,900 × 0.01)
12
Cash ($5,500 – $165)
5,335
Sales Discounts ($5,500 × 0.03)
165
Accounts Receivable—Houston Company
5,500
13
Accounts Payable—Tarin Wholesalers
200
Merchandise Inventory
200
15
Accounts Receivable—Java Company
3,300
Sales Revenue
3,300
Cost of Goods Sold
1,320
1,320
22
Accounts Payable—Tarin Wholesalers ($12,000 – $200)
Cash
P5-31A, cont.
Sep. 23
Sales Returns and Allowances
900
Accounts Receivable—Java Company
900
Merchandise Inventory
360
Cost of Goods Sold
360
Accounts Receivable—Smecker
1,985
Cash
Cost of Goods Sold
722
722
Sales Returns and Allowances
200
Accounts Receivable—Smecker
200
Cash ($1,785 – $17)
1,768
Sales Discounts (($1,900 – $200) × 0.01)
Accounts Receivable—Smecker ($1,985 – $200)
Cash
2,400
Accounts Receivable—Java Company ($3,300 – $900)
P5-32A Journalizing purchase and sale transactions
Learning Objectives 1, 2, 3
Nov. 14 Merch. Inv. $40
Journalize the following transactions that occurred in November 2016 for May’s Adventure Park. No
explanations are needed. Identify each accounts payable and accounts receivable with the vendor or
customer name.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Nov. 4
Merchandise Inventory
8,000
Accounts Payable—Valera Company
8,000
6
Merchandise Inventory
160
Cash
160
8
Accounts Payable—Valera Company
4,000
Merchandise Inventory ($8,000 × 0.50)
4,000
10
Cash
1,700
Sales Revenue
1,700
Cost of Goods Sold
680
Merchandise Inventory
680
11
Accounts Receivable—Garrison Corporation
Sales Revenue
Cost of Goods Sold
5,150
Merchandise Inventory
5,150
12
Delivery Expense
30
Cash
30
13
Accounts Receivable—Cain Company
9,000
Sales Revenue
9,000
Cost of Goods Sold
4,500
Merchandise Inventory
4,500
14
Accounts Payable—Valera Company ($8,000 – $4,000)
4,000
Cash ($4,000 – $40)
3,960
Merchandise Inventory ($4,000 × 0.01)
40
16
Sales Returns and Allowances
200
Accounts Receivable—Garrison Corporation
200
17
Sales Returns and Allowances
400
Accounts Receivable—Cain Company
400
Merchandise Inventory
200
Cost of Goods Sold
200
P5-32A, cont.
Nov. 18
Merchandise Inventory
3,700
Accounts Payable—Regan Corporation
3,700
20
Cash ($10,100 – $303)
9,797
Sales Discounts ($10,100 × 0.03)
303
Accounts Receivable—Garrison Corporation ($10,300 – $200)
10,100
26
Accounts Payable—Regan Corporation
3,700
Cash ($3,700 – $74)
3,626
Merchandise Inventory ($3,700 × 0.02)
28
Cash ($8,600 – $86)
8,514
Sales Discounts ($8,600 × 0.01)
Accounts Receivable—Cain Company ($9,000 – $400)
8,600
29
Merchandise Inventory
12,000
Cash
12,000
Merchandise Inventory
200
Cash
200
P5-33A Preparing a multi-step income statement, journalizing closing entries, and preparing a
post-closing trial balance
Learning Objectives 4, 5
1. Operating Income $59,050
The adjusted trial balance of Big Rita’s Music Company at June 30, 2016, follows:
Requirements
1. Prepare Big Rita’s multi-step income statement for the year ended June 30, 2016.
SOLUTION
Requirement 1
BIG RITA’S MUSIC COMPANY
Income Statement
Year Ended June 30, 2016
Sales Revenue
$ 187,000
Less: Sales Returns and Allowances
4,500
3,500
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Operating Income
Other Revenues and (Expenses):
(1,000)
(1,000)
Net Income
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Jun. 30
Sales Revenue
187,000
Income Summary
187,000
30
Income Summary
128,950
84,150
18,800
17,000
30
Income Summary
58,050
30
Retained Earnings
42,500
P5-33A, cont.
Requirement 3
BIG RITA’S MUSIC COMPANY
Post-Closing Trial Balance
June 30, 2016
Account Title
Balance
Debit
Credit
Cash
$ 3,700
Accounts Receivable
38,500
Merchandise Inventory
17,100
Office Supplies
Furniture
39,800
Accumulated Depreciation—Furniture
Accounts Payable
13,100
Salaries Payable
Unearned Revenue
Notes Payable, long-term
15,000
Common Stock
16,000
Retained Earnings
38,850
Total
P5-34A Journalizing adjusting entries, preparing adjusted trial balance, and preparing financial
statements
Learning Objectives 4, 5
2. Total Credits $482,880
The unadjusted trial balance for Travis Electronics Company at March 31, 2016, follows:
Requirements
1. Journalize the adjusting entries using the following data:
a. Interest revenue accrued, $450.
b. Salaries (Selling) accrued, $2,500.
c. Depreciation expense—Equipment (Administrative), $1,330.
d. Interest expense accrued, $1,100.
e. A physical count of inventory was completed. The ending Merchandise Inventory should have a
balance of $44,600.
2. Prepare Travis Electronics’s adjusted trial balance as of March 31, 2016.
3. Prepare Travis Electronics’s multi-step income statement for year ended March 31, 2016.
4. Prepare Travis Electronics’s statement of retained earnings for year ended March 31, 2016.
5. Prepare Travis Electronics’s classified balance sheet in report form as of March 31, 2016.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Mar. 31
Interest Receivable
450
Interest Revenue
450
Salaries Expense (Selling)
Depreciation Expense—Equipment (Administrative)
Interest Expense
Cost of Goods Sold
500
500
($45,100 – $44,600)
P5-34A, cont.
Requirement 2
TRAVIS ELECTRONICS COMPANY
Adjusted Trial Balance
March 31, 2016
Account Title
Balance
Debit
Credit
Cash
$ 3,700
Accounts Receivable
Interest Receivable
Merchandise Inventory
Office Supplies
Equipment
133,000
Accumulated Depreciation—Equipment
Accounts Payable
16,400
Salaries Payable
2,500
Interest Payable
1,100
Unearned Revenue
13,600
Notes Payable, long-term
44,000
Common Stock
40,000
Retained Earnings
16,900
Dividends
Sales Revenue
Interest Revenue
Sales Returns and Allowances
Sales Discounts
Cost of Goods Sold
171,000
Salaries Expense (Selling)
Rent Expense (Selling)
Salaries Expense (Administrative)
Utilities Expense (Administrative)
Depreciation Expense—Equipment (Administrative)
Interest Expense
Total
P5-34A, cont.
Requirement 3
TRAVIS ELECTRONICS COMPANY
Income Statement
Year Ended March 31, 2016
Sales Revenue
$ 310,000
Less: Sales Returns and Allowances
7,100
Sales Discounts
3,000
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses:
Salaries Expense
26,500
Rent Expense
15,000
Total Selling Expenses
41,500
Administrative Expenses:
Salaries Expense
5,400
Utilities Expense
10,100
Depreciation Expense—Equipment
1,330
Total Administrative Expenses
16,830
Total Operating Expenses
58,330
Operating Income
70,570
Other Revenues and (Expenses):
Interest Revenue
Interest Expense
Total Other Revenues and (Expenses)
Net Income
Requirement 4
TRAVIS ELECTRONICS COMPANY
Statement of Retained Earnings
Year Ended March 31, 2015
Retained Earnings, April 1, 2015
Net income for the year
Dividends
Retained Earnings, March 31, 2016
P5-34A, cont.
Requirement 5
TRAVIS ELECTRONICS COMPANY
Balance Sheet
March 31, 2016
Current Assets:
Cash
Accounts Receivable
33,300
Interest Receivable
Merchandise Inventory
44,600
Office Supplies
Total Current Assets
$ 88,350
Plant Assets:
Equipment
Less: Accumulated Depreciation
(37,930)
Total Plant Assets
95,070
Total Assets
$ 183,420
Liabilities
Current Liabilities:
Accounts Payable
Salaries Payable
Interest Payable
Unearned Revenue
13,600
Total Current Liabilities
$ 33,600
Long-term Liabilities:
Notes Payable
44,000
Total Liabilities
77,600
Common Stock
40,000
Retained Earnings
65,820
$ 183,420
P5-35A 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 $80,700
The records of Quality Cut Steak Company list the following selected accounts for the quarter ended
April 30, 2016:
Requirements
1. Prepare a single-step income statement.
2. Prepare a multi-step income statement.
3. M. Doherty, manager of the company, strives to earn a gross profit percentage of at least 50%. Did
Quality Cut achieve this goal? Show your calculations.
SOLUTION
Requirement 1
QUALITY CUT STEAK COMPANY
Income Statement
Quarter Ended April 30, 2016
Revenues:
Net Sales Revenue
$ 292,000
Interest Revenue
Rent Expense (Selling)
Utilities Expense (Selling)
Delivery Expense (Selling)
Depreciation Expense—Equipment (Administrative)
Utilities Expense (Administrative)
Rent Expense (Administrative)
Interest Expense
P5-35A, cont.
Requirement 2
QUALITY CUT STEAK COMPANY
Income Statement
Quarter Ended April 30, 2016
Sales Revenue
$ 306,000
Less: Sales Returns and Allowances
8,500
Sales Discounts
5,500
Net Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses:
Rent Expense
21,400
Utilities Expense
10,600
Delivery Expense
3,500
Total Selling Expenses
35,500
Administrative Expenses:
Depreciation Expense—Equipment
1,300
Utilities Expense
4,300
Rent Expense
9,600
Total Administrative Expenses
15,200
Total Operating Expenses
50,700
Operating Income
80,700
Other Revenues and (Expenses):
Interest Revenue
Interest Expense
(1,700)
Total Other Revenues and (Expenses)
Net Income
Requirement 3
Quality Cut Steak Company did not achieve the goal of a gross profit percentage of 50%, it was only
45%
Net Sales Revenue
$ 292,000
Less: Cost of Goods Sold
160,600
Gross Profit
$ 131,400
P5A-36A Journalizing purchase and sale transactions—periodic inventory system
Learning Objective 7
Appendix 5A
Mar. 10 Cash $5,238
Journalize the following transactions that occurred in March 2016 for Dream Line Company. Assume
Dream Line 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
Mar. 3
Purchases
6,500
Accounts Payable—Silton Wholesalers
6,500
4
45
Cash
45
4
Purchases
2,100
Cash
2,100
6
Accounts Payable—Silton Wholesalers
1,100
Purchase Returns and Allowances
1,100
8
Accounts Receivable—Hayes Company
3,200
Sales Revenue
3,200
9
Purchases
5,300
Accounts Payable—Tarin Wholesalers
5,300
10
Accounts Payable—Silton Wholesalers ($6,500 – $1,100)
5,400
Cash ($5,400 – $162)
5,238
Purchase Discounts ($5,400 × 0.03)
162
12
Cash ($3,200 – $32)
3,168
Sales Discounts ($3,200 × 0.01)
32
Accounts Receivable—Hayes Company
3,200
13
Accounts Payable—Tarin Wholesalers
100
Purchase Returns and Allowances
100
15
Accounts Receivable—Julian Company
2,200
Sales Revenue
2,200
22
Accounts Payable—Tarin Wholesalers ($5,300 – $100)
5,200
Cash
5,200
23
Sales Returns and Allowances
100
Accounts Receivable—Julian Company
100
25
Accounts Receivable—Smecker
800
Sales Revenue
800