BAT 4M
SOLUTIONS TO EXERCISES
EXERCISE 5-1
1.
2.
3.
4.
5.
April 5
April 6
April 7
April 8
May
2
Merchandise Inventory .................................
Accounts Payable ..................................
18,000
Merchandise Inventory .................................
Cash ........................................................
900
Equipment .....................................................
Accounts Payable ..................................
26,000
Accounts Payable .........................................
Merchandise Inventory ..................... ....
3,000
Accounts Payable ($18,000 – $3,000) ..........
Cash ........................................................
15,000
18,000
900
26,000
3,000
15,000
EXERCISE 5-2
(a) Pippen Company
1.
2.
3.
Dec.
Dec.
3
8
Dec. 13
Accounts Receivable ...............................
Sales...................................................
400,000
Cost of Goods Sold .................................
Merchandise Inventory. ....................
320,000
Sales Returns and Allowances ...............
Accounts Receivable ........................
20,000
Cash ($400,000 – $20,000) .......................
Accounts Receivable ........................
380,000
Merchandise Inventory ............................
Accounts Payable .............................
400,000
Accounts Payable ....................................
Merchandise Inventory .....................
20,000
Accounts Payable ....................................
Cash ...................................................
380,000
400,000
320,000
20,000
380,000
(b) Thomas Co.
1.
2.
3.
Dec.
Dec.
3
8
Dec. 13
400,000
20,000
380,000
EXERCISE 5-3
Sept. 6
10
12
14
20
Merchandise Inventory (60 X $20) ........................
Accounts Payable ..........................................
1,200
Accounts Payable (2 X $20) ..................................
Merchandise Inventory ..................................
40
Accounts Receivable (26 X $30) ...........................
Sales................................................................
780
Cost of Goods Sold (26 X $20) ..............................
Merchandise Inventory ..................................
520
Sales Returns and Allowances .............................
Accounts Receivable .....................................
30
Merchandise Inventory ..........................................
Cost of Goods Sold ........................................
20
Accounts Receivable (30 X $30) ...........................
Sales................................................................
900
Cost of Goods Sold (30 X $20) ..............................
Merchandise Inventory ..................................
600
1,200
40
780
520
30
20
900
600
EXERCISE 5-4
Sept. 2
5
8
12
20
30
Merchandise Inventory (90 X $15) ........................
Accounts Payable ..........................................
1,350
Accounts Payable ..................................................
Merchandise Inventory ..................................
60
Accounts Receivable .............................................
Sales (50 x $25)...............................................
1,250
Cost of Goods Sold ...............................................
Merchandise Inventory (50 x $15) .................
750
Accounts Receivable .............................................
Sales (30 x $25)...............................................
750
Cost of Goods Sold ...............................................
Merchandise Inventory (30 x $15) .................
450
Merchandise Inventory (15 x $16) .........................
Accounts Payable ..........................................
240
Cost of Goods Sold (Inventory Loss) ...................
Merchandise Inventory ..................................
15*
1,350
60
1,250
750
750
450
240
10 + 90 – 4 – 50 – 30 + 15 = 31 desk sets per records;
30 desk sets per count = 1 missing
* Note: We assumed that the missing desk set had a cost of
$15. It could also have been assumed to be $16, from the
September 20 purchase.
15
EXERCISE 5-5
1.
2.
3.
4.
Sales Returns and Allowances ........................................
Sales ..........................................................................
150
Supplies ............................................................................
Cash ..................................................................................
Accounts Payable .....................................................
Merchandise Inventory .............................................
250
250
Sales ..................................................................................
Merchandise Inventory .............................................
50
Cash ..................................................................................
Merchandise Inventory .............................................
270
150
250
250
50
270
EXERCISE 5-6
(a) Jun. 10
11
12
July
7
15
15
(b) July 31
31
Merchandise Inventory ....................................
Accounts Payable ....................................
5,000
Merchandise Inventory ....................................
Cash ..........................................................
300
Accounts Payable ............................................
Merchandise Inventory ............................
500
5,000
300
500
Accounts Payable ($5,000 – $500) .................
Cash ..........................................................
4,500
Cash .................................................................
Sales..........................................................
8,500
Cost of Goods Sold ($5,000 + $300 - $500) ...
Merchandise Inventory ............................
4,800
Sales ................................................................
Capital .......................................................
8,500
Capital..............................................................
Cost of Goods Sold ..................................
4,800
4,500
8,500
4,800
8,500
4,800
EXERCISE 5-7
(a)
CECILIE COMPANY
Income Statement (Partial)
For the Year Ended October 31, 2003
Sales revenues
Sales ...................................................................................
Less: Sales returns and allowances ................................
Net sales .............................................................................
$900,000
24,000
$876,000
Note: Freight Out is a selling expense.
(b) Closing entries:
Oct. 31
31
Sales .......................................................... 900,000
Capital ................................................
Capital .......................................................
Sales Returns and Allowances.........
Freight Out .........................................
900,000
36,000
24,000
12,000
EXERCISE 5-8
Sales
Less: Sales returns
Net sales
Less: Cost of goods
sold
Gross profit
Less:
Operating
expenses
Net income
Natural
Cosmetics
$90,000
(a) 16,000
74,000
64,000
Mattar
Grocery
(c) $100,000
6,000
94,000
(d) 72,000
Allied
Wholesalers
$144,000
12,000
(f) 132,000
(g) 108,000
10,000
6,000
22,000
12,000
24,000
18,000
$ 10,000
(h) $ 6,000
(b) $ 4,000
(e)
(a) Sales .........................................................................
*Sales returns............................................................
Net sales...................................................................
$90,000
(16,000)
$74,000
(b) Gross profit ..............................................................
Operating expenses ................................................
*Net income ..............................................................
$10,000
(6,000)
$ 4,000
(c) *Sales .......................................................................
Sales returns ............................................................
Net sales...................................................................
$100,000
(6,000)
$ 94,000
(d) Net sales...................................................................
*Cost of goods sold .................................................
Gross profit ..............................................................
$94,000
(72,000)
$22,000
(e) Gross profit ..............................................................
*Operating expenses ...............................................
Net income ...............................................................
$22,000
(12,000)
$10,000
(f)
Sales .........................................................................
Sales returns ............................................................
*Net sales .................................................................
$144,000
(12,000)
$132,000
(g) Net sales...................................................................
*Cost of goods sold .................................................
Gross profit ..............................................................
$132,000
(108,000)
$ 24,000
(h) Gross profit ..............................................................
Operating expenses ................................................
*Net income ..............................................................
$24,000
(18,000)
$ 6,000
EXERCISE 5-9
(a)
CHEVALIER COMPANY
Income Statement
For the Year Ended December 31, 2002
Net sales .....................................................................
Cost of goods sold .....................................................
Gross profit ................................................................
Operating expenses
Selling expenses ................................................
Administrative expenses ...................................
Total operating expenses ...........................
Income from operations ............................................
Other revenues and gains
Interest revenue ..................................................
Other expenses and losses
Interest expense .................................... $70,000
Loss on sale of equipment .................... 10,000
Net income..................................................................
(b)
$2,359,000
00,989,000
1,370,000
$690,000
0435,000
1,125,000
245,000
$45,000
80,000
35,000
$ 210,000
CHEVALIER COMPANY
Income Statement
For the Year Ended December 31, 2002
Revenues
Net sales ............................................................
Interest revenue ................................................
Total revenues ............................................
Expenses
Cost of goods sold ............................................
Selling expenses ...............................................
Administrative expenses ..................................
Interest expense ................................................
Loss on sale of equipment ...............................
Total expenses ...........................................
Net income.................................................................
$2,359,000
0 45,000
2,404,000
$989,000
690,000
435,000
70,000
0010,000
2,194,000
$ 210,000
EXERCISE 5-10
(a)
JETFORM CORPORATION
Income Statement
For the Year Ended April 30, 2000
(in thousands)
Revenues
Revenue from products and services ................
Interest revenue ...................................................
Gain on sale of assets .........................................
Other income .......................................................
Total revenues ...............................................
Expenses
Cost of products and services ............................
Sales and marketing expenses ...........................
General and administrative expenses ................
Amortization expense ..........................................
Income tax expense .............................................
Total expenses ...............................................
Net loss
($ 8,101
$94,317
2,868
1,813
295
$ 99,293
$24,426
45,097
26,485
10,300
1,086
107,394
PROBLEMS SET A
SOLUTIONS TO PROBLEMS
PROBLEM 5-1A
(a)
April 5
13
17
Merchandise Inventory–Custom Sedans
(3 x $24,000) .....................................................
Accounts Payable ....................................
72,000
Merchandise Inventory–Recreation Vehicles
(2 x $28,000) .....................................................
Accounts Payable ....................................
56,000
72,000
56,000
Accounts Receivable ....................................... 114,000
Sales (4 x $28,500)....................................
114,000
Cost of Goods Sold (4 x $24,000) ...................
Merchandise Inventory–Custom Sedans
20
22
24
28
Merchandise Inventory–Convertibles
(2 x $26,000) .....................................................
Accounts Payable ....................................
Accounts Payable ............................................
Merchandise Inventory–Convertibles .....
96,000
96,000
52,000
52,000
26,000
26,000
Accounts Receivable ....................................... 102,000
Sales (3 x $34,000)....................................
102,000
Cost of Goods Sold (3 x $28,000) ................... 84,000
Merchandise Inventory–Recreation Vehicles
84,000
Accounts Receivable .......................................
Sales..........................................................
31,000
31,000
Cost of Goods Sold .........................................
Merchandise Inventory–Convertibles .....
26,000
26,000
PROBLEM 5-1A (Continued)
(b)
Merchandise Inventory
–Custom Sedans
Bal. 96,000
96,000
72,000
72,000
Merchandise Inventory
–Recreation Vehicles
Bal. 56,000
84,000
56,000
28,000
Merchandise Inventory
–Convertibles
Bal. 78,000
26,000
52,000
26,000
78,000
Cost of Goods Sold
96,000
84,000
26,000
206,000
PROBLEM 5-2A
GENERAL JOURNAL
Account Titles
Date
July 1
3
9
12
17
18
20
21
Ref. Debit
Merchandise Inventory (50 x $30) ........... 120
Accounts Payable ............................. 201
1,500
Accounts Receivable (40 x $50) .............. 112
Sales .................................................. 401
2,000
Cost of Goods Sold (40 x $30) ................. 505
Merchandise Inventory ..................... 120
1,200
Accounts Payable ..................................... 201
Cash ................................................... 101
1,500
Cash .......................................................... 101
Accounts Receivable ........................ 112
2,000
Accounts Receivable (30 x $50) .............. 112
Sales .................................................. 401
1,500
Cost of Goods Sold (30 x $30) ................. 505
Merchandise Inventory ..................... 120
900
Merchandise Inventory ($1,700 + $100)... 120
Accounts Payable ............................. 201
Cash ................................................... 101
1,800
Accounts Payable ..................................... 201
Merchandise Inventory ..................... 120
300
Cash .......................................................... 101
Accounts Receivable ........................ 112
1,500
Credit
1,500
2,000
1,200
1,500
2,000
1,500
900
1,700
100
300
1,500
PROBLEM 5-2A (Continued)
Date
Account Titles
July 22
Accounts Receivable (40 x $50) .............. 112
Sales .................................................. 401
2,000
Cost of Goods Sold (40 x $30) ................. 505
Merchandise Inventory ..................... 120
1,200
Accounts Payable ($1,700 - $300) ........... 210
Cash ................................................... 101
1,400
Sales Returns and Allowances ................ 412
Accounts Receivable ........................ 112
250
Merchandise Inventory............................. 120
Cost of Goods Sold .......................... 505
150
30
31
Ref. Debit
Credit
2,000
1,200
1,400
250
150
PROBLEM 5-3A
(a)
Date
Apr. 2
4
5
6
14
16
18
20
23
GENERAL JOURNAL
J1
Account Titles
Ref. Debit
Merchandise Inventory............................. 120 4,900
Accounts Payable ............................. 201
Accounts Receivable................................ 112
Sales .................................................. 401
5,000
Cost of Goods Sold .................................. 505
Merchandise Inventory ..................... 120
4,000
Freight Out ................................................ 644
Cash ................................................... 101
200
Accounts Payable ..................................... 201
Merchandise Inventory ..................... 120
300
Merchandise Inventory............................. 120
Cash ................................................... 101
4,400
Cash .......................................................... 101
Merchandise Inventory ..................... 120
500
Merchandise Inventory............................. 120
Accounts Payable ............................. 201
4,200
Merchandise Inventory............................. 120
Cash ................................................... 101
100
Cash .......................................................... 101
Sales .................................................. 401
6,400
Cost of Goods Sold .................................. 505
Merchandise Inventory ..................... 120
5,200
Credit
4,900
5,000
4,000
200
300
4,400
500
4,200
100
6,400
5,200
PROBLEM 5-3A (Continued)
(a) (Continued)
Date
Apr. 26
27
28
29
30
J2
Account Titles
Ref. Debit
Merchandise Inventory ............................ 120 2,300
Cash................................................... 101
Accounts Payable ($4,900 - $300) ........... 201
Cash................................................... 101
4,600
Cash .......................................................... 101
Accounts Receivable ........................ 112
5,000
Sales Returns and Allowances................ 412
Cash................................................... 101
90
Merchandise Inventory ............................ 120
Cost of Goods Sold .......................... 505
60
Accounts Receivable ............................... 112
Sales .................................................. 401
3,700
Cost of Goods Sold .................................. 505
Merchandise Inventory ..................... 120
3,000
Credit
2,300
4,600
5,000
90
60
3,700
3,000
(b)
Cash
Date
Apr.
No. 101
Explanation
1
5
14
16
20
23
26
27
28
29
Balance
PROBLEM 5-3A (Continued)
Ref.

J1
J1
J1
J1
J1
J2
J2
J2
J2
Debit
Credit
Balance
200
4,400
500
100
6,400
2,300
4,600
5,000
90
9,000
8,800
4,400
4,900
4,800
11,200
8,900
4,300
9,300
9,210
(b) (Continued)
Accounts Receivable
Date
Apr.
Explanation
4
28
30
No. 112
Ref.
J1
J2
J2
Debit
Credit
Balance
5,000
5,000
3,700
Merchandise Inventory
Date
Apr.
Explanation
2
4
6
14
16
18
20
23
26
29
30
1415
No. 120
Ref.
J1
J1
J1
J1
J1
J1
J1
J1
J2
J2
J2
Debit
Credit
Apr.
Explanation
2
6
18
27
Balance
4,900
4,000
300
4,400
500
4,200
100
5,200
2,300
60
3,000
Accounts Payable
Date
5,000
0
3,700
4,900
900
600
5,000
4,500
8,700
8,800
3,600
5,900
5,960
2,960
No. 201
Ref.
J1
J1
J1
J2
Debit
Credit
4,900
300
4,200
4,600
Balance
4,900
4,600
8,800
4,200
PROBLEM 5-3A (Continued)
(b) (Continued)
M. Nisson, Capital
Date
Explanation
Apr.
1
Balance
No. 301
Ref.
Debit
Credit
Balance

9,000
Sales
No. 401
Date
Apr.
Explanation
4
23
30
Ref.
Debit
Credit
J1
J1
J2
Balance
5,000
6,400
3,700
Sales Returns and Allowances
Date
Explanation
Apr. 29
No. 412
Ref.
Debit
J2
Credit
Apr.
Explanation
4
23
29
30
90
No. 505
Ref.
J1
J1
J2
J2
Debit
Credit
Apr.
60
3,000
4,000
9,200
9,140
12,140
No. 644
Explanation
5
Balance
4,000
5,200
Freight Out
Date
Balance
90
Cost of Goods Sold
Date
5,000
11,400
15,100
Ref.
J1
Debit
200
Credit
Balance
200
PROBLEM 5-3A (Continued)
(c)
NISSON DISTRIBUTING COMPANY
Income Statement (Partial)
For the Month Ended April 30, 2003
Sales revenues
Sales ...............................................................................
Less: Sales returns and allowances ............................
Net sales .........................................................................
Cost of goods sold ................................................................
Gross profit ............................................................................
(d)
$15,100
90
15,010
12,140
$ 2,870
NISSON DISTRIBUTING COMPANY
Balance Sheet (Partial)
April 30, 2003
Assets
Current assets
Cash ...............................................................................
Accounts receivable .....................................................
Merchandise inventory .................................................
Total current assets ..............................................
$ 9,210
3,700
2,960
15,870
PROBLEM 5-4A
Adjusting entries—not required:
Dec. 31
Insurance Expense .................................................
Prepaid Insurance ............................................
Amortization Expense ............................................
Accumulated Amortization—Store Equipment
Rent Expense ..........................................................
Rent Payable ....................................................
(a)
800
800
3,000
3,000
500
WORLD ENTERPRISES
Income Statement
For the Year Ended December 31, 2002
Sales revenues
Sales .........................................................................
Less: Sales returns and allowances .....................
Net sales...................................................................
Cost of goods sold ..........................................................
Gross profit ...................................................................
Operating expenses
Salaries expense .....................................
$31,600
Amortization expense .............................
3,000
Rent expense ($6,100 + $500) ................
6,600
Insurance expense .................................
000800
Total operating expenses .................................
Net income.......................................................................
$238,500
4 4,600
233,900
177,000
56,900
.. 42,000
$14,900
WORLD ENTERPRISES
Statement of Owner’s Equity
For the Year Ended December 31, 2002
R. Roger, Capital, January 1 ...........................................
Add: Net income..............................................................
R. Roger, Capital, December 31 .....................................
$50,300
14,900
$65,200
500
PROBLEM 5-4A (Continued)
(a) (Continued)
WORLD ENTERPRISES
Balance Sheet
December 31, 2002
Assets
Current assets
Cash ................................................................................
Accounts receivable ......................................................
Merchandise inventory...................................................
Prepaid insurance ($1,800 – $800) ................................
Total current assets ................................................
$ 14,000
30,600
27,500
1,000
73,100
Capital assets
Equipment .......................................................... $42,000
Less: Accumulated amortization – Equipment 12,000
30,000
Total assets ............................................................. $103,100
Liabilities and Owner's Equity
Current liabilities
Accounts payable ($34,400 + $500) ............................... $ 34,900
Sales taxes payable ........................................................
3,000
Total current liabilities ...................................................
37,900
Owner's equity
R. Roger, Capital.............................................................
65,200
Total liabilities and owner's equity ........................ $103,100
PROBLEM 5-4A (Continued)
(b) Dec. 31
31
Sales ..........................................................
R. Roger, Capital ...............................
238,500
R. Roger, Capital .......................................
Sales Returns and Allowances.........
Cost of Goods Sold ...........................
Salaries Expense ...............................
Rent Expense ....................................
Insurance Expense............................
Amortization Expense .......................
223,600
238,500
4,600
177,000
31,600
6,600
800
3,000