Principles of Accounting I
Chapter 5 In-class Problems Key
BE5-3
Prepare the journal entries to record the following transactions on Monroe Company's books using a perpetual inventory
system.
(a) On March 2, Monroe Company sold $900,000 of merchandise to Churchill Company, terms 2/10, n/30. The cost
of the merchandise sold was $620,000.
(b) On March 6, Churchill Company returned $120,000 of the merchandise purchased on March 2. The cost of the
returned merchandise was $90,000.
(c) On March 12, Monroe Company received the balance due from Churchill Company.
(a)
(b)
(c)
Accounts Receivable............................................................................
Sales ...........................................................................................
Cost of Goods Sold ..............................................................................
Merchandise Inventory ............................................................
900,000
Sales Returns and Allowances............................................................
Accounts Receivable.................................................................
Merchandise Inventory.......................................................................
Cost of Goods Sold ...................................................................
120,000
Cash ($780,000 – $15,600) ..................................................................
Sales Discounts ($780,000 X 2%) .......................................................
Accounts Receivable.................................................................
($900,000 – $120,000)
764,400
15,600
900,000
620,000
620,000
120,000
90,000
90,000
780,000
BE5-4
From the information in BE5-3, prepare the journal entries to record these transactions on Churchill Company's books
under a perpetual inventory system.
(a)
Merchandise Inventory.......................................................................
900,000
Accounts Payable......................................................................
900,000
(b)
(c)
Accounts Payable ................................................................................
Merchandise Inventory ............................................................
120,000
Accounts Payable ($900,000 – $120,000) ...........................................
Merchandise Inventory
($780,000 X 2%) ...................................................................
Cash ($780,000 – $15,600)........................................................
780,000
120,000
15,600
764,400
E5-7
Peter Kalle Company had the following account balances at year-end: cost of goods sold $60,000; merchandise
inventory $15,000; operating expenses $29,000; sales $108,000; sales discounts $1,200; and sales returns and
allowances $1,700. A physical count of inventory determines that merchandise inventory on hand is $14,100.
Prepare the adjusting entry necessary as a result of the physical count.
Cost of Goods Sold……………………………………….900
Merchandise Inventory ......................................................... 900
E5-9 Presented below is information for Obley Company for the month of March 2010.
Cost of goods sold
$212,000 Rent expense
$ 32,000
Freight-out
7,000
8,000
Sales discounts
Insurance expense 12,000
Sales returns and allowances 13,000
Salary expense
Sales
58,000
370,000
(a) Prepare a multiple-step income statement.
(b) Compute the gross profit rate.
(a)
OBLEY COMPANY
Income Statement
For the Month Ended March 31, 2010
Sales revenues
Sales ..................................................................................................
Less: Sales returns and allowances ...............................................
Sales discounts .................................................................
Net sales ..........................................................................................
Cost of goods sold ...................................................................................
Gross profit ..........................................................................................
Operating expenses
Salary expense..................................................................................
Rent expense ....................................................................................
Insurance expense............................................................................
Freight-out .......................................................................................
Total operating expenses ................................................
Net income ........................................................................................
(b)
Gross profit rate = $137,000 ÷ $349,000 = 39.26%.
$370,000
$13,000
8,000
21,000
349,000
212,000
137,000
58,000
32,000
12,000
7,000
109,000
$ 28,000
PROBLEM 5-1B
(a) June 1
3
6
9
15
17
20
24
26
27
30
Merchandise Inventory................................
Accounts Payable ................................
1,200
Accounts Receivable...................................
Sales .....................................................
Cost of Goods Sold .....................................
Merchandise Inventory ........................
2,400
Accounts Payable ........................................
Merchandise Inventory ........................
100
Accounts Payable ($1200 – $100) ...............
Merchandise Inventory
($1,000 X .02) ....................................
Cash ......................................................
1,100
Cash..............................................................
Accounts Receivable ...........................
2,400
Accounts Receivable...................................
Sales .....................................................
Cost of Goods Sold .....................................
Merchandise Inventory ........................
1,300
Merchandise Inventory................................
Accounts Payable ................................
1,500
Sales Returns and Allowances ...................
Accounts Receivable ...........................
Merchandise Inventory................................
Cost of Goods Sold..............................
120
Accounts Payable ........................................
Merchandise Inventory
($1,500 X .02) ....................................
Cash ......................................................
1,500
Cash..............................................................
Sales Discounts ($1,180 X .02) ...................
Accounts Receivable (1300-120) .........
1,156
24
Supplies ............................................ 350
Accounts Payable ................................
1,200
2,400
1,440
1,440
100
22
1,078
2,400
1,300
780
780
1,500
120
72
72
30
1,470
1,180
350
PROBLEM 5-2B
Date
May 1
2
5
9
10
11
12
15
17
19
General Journal
Account Titles and Explanation
Merchandise Inventory.....................
Accounts Payable .....................
Ref.
120
201
Debit
4,200
Accounts Receivable .......................
Sales ..........................................
112
401
2,100
Cost of Goods Sold ..........................
Merchandise Inventory .............
505
120
1,300
Accounts Payable .............................
Merchandise Inventory .............
201
120
300
Cash ($2,100 – $21) ..........................
Sales Discounts ($2,100 X 1%) ........
Accounts Receivable ................
101
414
112
2,079
21
Accounts Payable ($4,200 – $300) ......
Merchandise Inventory
($3,900 X 2%) .........................
Cash ...........................................
201
3,900
Supplies ............................................
Cash ...........................................
126
101
400
Merchandise Inventory.....................
Cash ...........................................
120
101
1,400
Cash ..................................................
Merchandise Inventory .............
101
120
150
Merchandise Inventory.....................
Accounts Payable .....................
120
201
1,300
Merchandise Inventory.....................
Cash ...........................................
120
101
130
J1
Credit
4,200
2,100
1,300
300
2,100
120
101
78
3,822
400
1,400
150
1,300
130
PROBLEM 5-2B (Continued)
Date
May 24
25
27
29
31
General Journal
Account Titles and Explanation
Cash ....................................................
Sales............................................
Ref.
101
401
Debit
3,200
Cost of Goods Sold ...........................
Merchandise Inventory ..............
505
120
2,000
Merchandise Inventory ......................
Accounts Payable ......................
120
201
550
Accounts Payable ..............................
Merchandise Inventory
($1,300 X 2%) ..........................
Cash ............................................
201
1,300
Sales Returns and Allowances .........
Cash ............................................
412
101
60
Merchandise Inventory ......................
Cost of Goods Sold ....................
120
505
10
Accounts Receivable .........................
Sales............................................
112
401
900
Cost of Goods Sold ...........................
Merchandise Inventory ..............
505
120
560
J1
Credit
3,200
2,000
550
120
101
26
1,274
60
10
900
560