Chapter 5 – Merchandising Operations
Pages 190 – 207
Name ___________________________
Vocabulary
Merchandise Inventory
Cost of Goods Sold
Compare an Income Statement for a service company versus a Merchandiser
SERVICE COMPANY
MERCHANDISER
Minus
Equals
Minus
Minus
Equals
Equals
Draw a Merchandise Inventory T-Account (page 193)
Inventory Systems: Perpetual and Periodic
Compare the two systems
PERPETUAL INVENTORY SYSTEM
*We will practice the perpetual inventory system for class
PERIODIC INVENTORY SYSTEM
ACCOUNTING FOR MERCHANDISE PURCHASES
What is an invoice? _________________________________________________________________________
Purchase of Inventory (page 194)
Show the journal entry for recording a purchase on account
Purchase Discounts
What does 2/10, n/30 mean in your own
words?___________________________________________________
_________________________________________________________________________________________
Show the journal entry for recording the payment within the discount period
Why is the discount credited to Inventory? ______________________________________________________
_________________________________________________________________________________________
If the payment is NOT paid within the discount period, how would the journal entry look?
Purchase Returns and Allowances (page 196)
What is a return? __________________________________________________________________________
What is an allowance? ______________________________________________________________________
Show the journal entry for a return of $100
Transportation Costs & Ownership Transfer
What is the point of transfer called? ___________________________________________________________
What does this mean? ______________________________________________________________________
________________________________________________________________________________________
Shipping Terms
Ownership Transfers At
Goods In Transit
Owned By
Transportation Costs Paid By
The cost principle requires that any necessary transportations cost of a buyer be included with what?
__________________________________________________________________________________________
Itemized Costs of Merchandise Purchase
$ xxx,xxx
(xxxx)
(xxxx)
xxxx
$xxx,xxx
ACCOUNTING FOR MERCHANDISE SALES (page 199)
Most sales in the US are made on account (on credit). Record a $2,400 sale on account:
These goods cost the seller $1,600, so the related cost of goods sold entry is:
Why is there a second entry? ___________________________________________________________
__________________________________________________________________________________
When the cash comes in, the seller records the cash receipt on account as follows:
Sales Discounts
Record a sample journal of a cash receipt with a 2% discount
Sales Returns and Allowances
Vocabulary
Sales Return
Sales Allowance
Assume that the buyer returns $800 of the goods.
Record the sale return as follows:
Why is accounts receivable decreased? ________________________________________________
Update the inventory record:
Sales Allowances
Record a sales allowance for damaged goods:
Why is there no inventory entry for a sales allowance? ____________________________________
_________________________________________________________________________________
What type of account is “Sales Returns and Allowances? ____________________________________
ADJUSTING AND CLOSING THE ACCOUNTS OF A MERCHANDISER
Adjusting Inventory Based on a Physical Count
How often is inventory counted? At least _____________________________________________.
What are some reasons inventory could be different than what’s on the books?
1.
2.
Show the journal entry for a $250 adjusting entry (due to shrinkage):
Closing the Accounts of a Merchandiser
The first closing entry (how is this different than chapter 3):
1.
2.
The second closing entry (what new accounts are closed):
1.
2.
The last two closing entries (same as last chapter):
1.
2.
FINANCIAL STATEMENTS FORMATS
Compare the two systems
MULTI-STEP INCOME STATEMENT
SINGLE STEP INCOME STATEMENT
GROSS MARGIN RATIO (page 210)
Show the formula for calculating Gross margin percentage:
Why is gross margin ratio important? ________________________________________________
___________________________________________________________________________________