Group Work – Chapter 5
1.
Prepare journal entries for the following Sales transactions entered into by Smith Inc. The company
uses the Gross Method to account for Sales Revenue and Sales Discounts.
March 2
Smith Inc. sold $8,500 worth of goods on account to Jones Inc. with terms of 2/10, net/30
on the Sales Invoice.
Accounts Receivable
Sales Revenue
March 5
8,500
8,500
Smith’s customer, Jones Inc., returned $1,500 worth of goods from the March 2 sale
because the goods did not meet standards required by their company.
Sales Returns & Allow
1,500
Accounts Receivable
1,500
March 9
Smith received payment from Jones Inc. for the balance of their account.
Cash
6,860
Sales Discount
140
Accounts Receivable
7,000
2.
Prepare journal entries for the following Purchases transactions entered into by Smith Inc. The
company uses a Periodic System and the Gross Method to record Inventory purchases and Purchase
Discounts.
March 8
Smith Inc. purchased $10,000 worth of inventory on account from Reid Inc. with terms
of 1/10, net 30.
Purchases
10,000
Accounts Payable
10,000
March 10
Smith Inc. paid the transportation or shipping costs for the March 8 purchase to
Northwood Transportation Inc. for $500.
Freight In
Cash
500
500
March 13
Smith Inc. returned $1,000 of Inventory from the March 8 purchase with Reid Inc.
because the goods were damaged. Smith Inc. has not yet paid the account balance from
the March 8 purchase.
Accounts Payable
1000
Purchases Returns & Allow 1000
March 16
Smith Inc. paid the balance of their account with Reid Inc. from the March 8 purchase.
Accounts Payable
Purchase Discounts
Cash
9000
90
8910
3.
For each of the following cases, fill in the missing amounts:
Sales Revenue
Sales Returns and Allowances
Sales Discounts
Net Sales
$13,500
$1,200
$180
12,120
$22,000
$2,700
$400
18,900
$32,600
4,100
$650
$27,850
Beginning Inventory
Purchases (Gross)
Purchase Returns and Allowances
Purchase Discounts
Transportation-In
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
$11,000
$6,000
$800
$120
$500
16,580
$9,950
6,630
18,000
$10,400
$1,550
$230
$900
$27,520
$16,500
11,020
$21,600
14,200
$3,000
$330
$1,250
$33,720
15,000
$18,720
$5,490
$7,880
9,130
Gross Profit
4.
The following accounts and balances are on the General Ledger for Smith Inc. through Dec. 31, 2014.
Beginning Inventory
Ending Inventory
Purchase Discounts
Purchase Returns and Allowances
Purchases (Gross)
Sales Discounts
Sales Returns and Allowances
Sales Revenue
Transportation-In
$41,500
$38,000
$2,200
$3,150
$60,300
$1,850
$6,200
$71,500
$1,800
1.
What would be Net Sales for Smith Inc. in 2014? 63,450
2.
What would be Net Purchases for Smith Inc. in 2014? 54,950
3.
What is the Cost of Goods Available for Sale for Smith Inc. in 2014? 98,250
4.
What would be Cost of Goods Sold for Smith Inc. in 2014? 60,250
5.
What would be Gross Profit for Smith Inc. in 2014? 3,200