Chapter 6accounting for merchandising BUSINESSES
PRACTICE EXERCISES
PE 6–1A
$162,300 ($32,800 + $379,500 – $250,000)
PE 6–3A
a. Accounts Receivable 41,000
Sales 41,000
Cost of Merchandise Sold 22,500
Merchandise Inventory 22,500
b. Cash 40,590
Sales Discounts 410
Accounts Receivable 41,000
PE 6–4A
a. $19,800. Purchase of $21,500 less the return of $1,500 less the discount of
$200 [($21,500 – $1,500) × 1%].
b. Accounts Payable
PE 6–5A
a. $8,910. Purchase of $13,150 less return of $4,150 less the discount of
$90 [($13,150 – $4,150) × 1%].
b. $27,458. Purchase of $32,100 less return of $5,000 less the discount of
$542 [($32,100 – $5,000) × 2%] plus $900 of shipping.
PE 6–6A
Saddlebag Co. journal entries:
Cash ($17,500 – $350 + $600) 17,750
Sales Discounts ($17,500 × 2%) 350
Accounts Receivable—Bioscan Co. ($17,500 + $600) 18,100
Bioscan Co. journal entries:
Accounts Payable—Saddlebag Co. ($17,500 + $600) 18,100
Merchandise Inventory ($17,500 × 2%) 350
Cash ($17,500 – $350 + $600) 17,750
PE 6–7A
Oct. 31 Cost of Merchandise Sold 80,250
Merchandise Inventory 80,250
Inventory shrinkage ($975,000 – $894,750).
EXERCISES
Ex. 6–11
a.
EL DORADO FURNISHINGS COMPANY
Income Statement
For the Year Ended March 31, 2010
Revenue from sales:
Sales $2,550,000
Less: Sales returns and allowances $160,000
Sales discounts 40,000 200,000
Net sales $2,350,000
Cost of merchandise sold 1,400,000
Gross profit $ 950,000
Expenses:
Selling expenses $ 410,000
Administrative expenses 250,000
Total expenses 660,000
Income from operations $ 290,000
Other expense:
Interest expense 15,000
Net income $ 275,000
b. The major advantage of the multiple-step form of income statement is that relationships such as gross profit to sales are indicated. The major disadvantages are that it is more complex and the total revenues and expenses are not indicated, as is the case in the single-step income statement.
Ex. 6–25
a. Accounts Receivable 3,570
Sales 3,400
Sales Tax Payable ($3,400 × 5%) 170
Cost of Merchandise Sold 2,000
Merchandise Inventory 2,000
b. Sales Tax Payable 41,950
Cash 41,950
Ex. 6–32
2010
May 31 Sales 313,540
Income Summary 313,540
31 Income Summary 411,685
Administrative Expenses 65,300
Cost of Merchandise Sold 188,000
Interest Expense 1,920
Sales Discounts 18,000
Sales Returns and Allowances 12,000
Selling Expenses 124,000
Store Supplies Expense 2,465
31 Jessica Duerr, Capital 98,145
Income Summary 98,145
31 Jessica Duerr, Capital 7,950
Jessica Duerr, Drawing 7,950