SOLUTIONS TO EXERCISES
Exercise 13-1
a. Net Sales, $242,000
Cost of Goods Available for Sale, $318,000
Gross Profit, $60,000
b. Sales Returns and Allowances, $8,000
Net Purchases, $260,000
Gross Profit, $88,000
c. Sales, $640,000
Beginning Merchandise Inventory, $84,000
Cost of Goods Sold, $404,000
Gross Profit, $224,000
Exercise 13-2
Cost of Goods Sold:
$188,000.00
Merchandise Inventory, Jan. 1, 20—
$480,000.00
Purchases
Less: Purchases Returns and
Allowances
Purchases Discounts
$16,000.00
9,000.00
25,000.00
$455,000.00
Net Purchases
Add Freight In
27,000.00
482,000.00
Delivered Cost of Purchases
$670,000.00
Cost of Goods Available for Sale
Less Merchandise Inventory,
Dec. 31, 20—
192,000.00
$478,000.00
Cost of Goods Sold
Exercise 13-3
a.
b.
c.
d.
e.
Advertising Expense, SE
Rent Expense, GE
Purchases Discounts, CGS
Sales Returns and Allowances, S
Interest Income, OI
f.
g.
h.
i.
j.
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Freight In, CGS
Depreciation Expense, Building, GE
Interest Expense, OE
Insurance Expense, GE
Delivery Expense, SE
1
Exercise 13-4
Baki Company
Income Statement
For Year Ended June 30, 20—
Revenue from Sales:
Sales
Less: Sales Returns
and Allowances
Sales Discounts
Net Sales
Cost of Goods Sold:
Merchandise Inventory,
July 1, 20—
Purchases
Less: Purchases Returns
and Allowances
Purchases Discounts
Net Purchases
Add Freight In
Delivered Cost of
Purchases
Cost of Goods Available
for Sale
Less Merchandise
Inventory, June 30, 20—
Cost of Goods Sold
Gross Profit
Operating Expenses:
Selling Expenses
General Expenses
Total Operating Expenses
Net Income
$291,000.00
$ 11,100.00
4,100.00
15,200.00
$275,800.00
27,000.00
$116,000.00
$1,200.00
1,000.00
2,200.00
$113,800.00
7,500.00
121,300.00
$148,300.00
23,000.00
125,300.00
$150,500.00
$ 56,000.00
49,000.00
105,000.00
$ 45,500.00
Exercise 13-5
a.
b.
c.
d.
e.
Accounts Receivable, CA
Building, PE
Wages Payable, CL
Prepaid Taxes, CA
Mortgage Payable (current), CL
f.
g.
h.
i.
j.
Supplies, CA
Mortgage Payable (due in 3 years), LTL
Unearned Fees, CL
D. Mann, Capital, OE
Notes Payable (due in 3 months), CL
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2
Exercise 13-6
Current Assets:
Prepaid Insurance
Merchandise Inventory
Store Supplies
Cash
Notes Receivable
Total
$
600
72,000
1,000
9,000
4,000
$86,600
Current Liabilities:
Unearned Fees
$ 700
Notes Payable
7,000
Accounts Payable
22,000
Mortgage Payable (current portion)
4,400
Salaries Payable
2,000
$36,100
Working capital = $86,600 – $36,100 = $50,500
Current ratio =
$86,600
$36,100
= 2.40
Exercise 13-7
GENERAL JOURNAL
DATE
1
2
3
4
5
DESCRIPTION
POST.
REF.
20—
Adjusting Entries
Dec. 31 Sales
Purchases Returns and Allowances
Purchases Discounts
Income Summary
PAGE
DEBIT
CREDIT
1
504,000.00
7,600.00
5,600.00
2
3
4
517,200.00
6
7
8
9
10
11
12
13
6
31 Income Summary
Sales Returns and Allowances
Purchases
Freight In
Salary Expense
Rent Expense
Miscellaneous Expense
365,200.00
31 Income Summary
H. Beal, Capital
( $104,000
– ( $88,000
168,000.00
7
8,000.00
236,800.00
15,200.00
68,000.00
24,000.00
13,200.00
14
15
16
17
18
21
8
9
10
11
12
13
14
15
168,000.00
+ $517,200 )
+ $365,200 )
16
17
18
19
20
5
19
31 H. Beal, Capital
H. Beal, Drawing
22
54,000.00
20
54,000.00
21
22
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3
Exercise 13-8
GENERAL JOURNAL
DATE
1
2
3
DESCRIPTION
PAGE
POST.
REF.
DEBIT
20—
Closing Entries
Dec. 31 Income Summary
T. H. Reece, Capital
CREDIT
1
92,000.00
2
92,000.00
4
5
6
3
4
31 T. H. Reece, Capital
T. H. Reece, Drawing
69,000.00
5
69,000.00
7
6
7
Reece Company
Statement of Owner's Equity
For Year Ended December 31, 20—
T. H. Reece, Capital, January 1, 20—
Additional Investment, April 7, 20—
Total Investment
Net Income for the Year
Less Withdrawals for the Year
Increase in Capital
T. H. Reece, Capital, December 31, 20—
Copyright © Houghton Mifflin Company. All rights reserved.
$440,000.00
16,000.00
$456,000.00
$92,000.00
69,000.00
23,000.00
$479,000.00
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