Last revised: October 26, 2012
Chapter 5
Accounting for
Merchandising Activities
QUICK STUDY
Quick Study 5-1
Net sales ..................................
Cost of goods sold .................
Gross profit from sales ..........
Operating expenses ...............
Net income (loss) ...................
A
$14,000
8,000
$ 6,000
9,000
$ (3,000)
B
$102,000
64,000
$ 38,000
31,000
$ 7,000
C
$68,000
31,000
$37,000
22,000
$15,000
D
$540,000
320,000
$220,000
261,000
$(41,000)
E
$398,000
215,000
$183,000
106,000
$ 77,000
Quick Study 5-2
a.
b.
c.
d.
e.
Periodic AND perpetual inventory systems
Perpetual inventory systems
Perpetual inventory systems
Periodic inventory systems
Perpetual inventory systems
Quick Study 5-3
a. This information reflects a perpetual inventory system.
150 + 340 – 60 = 430 Cost of Goods Sold (credit to Merchandise Inventory and
debit to Cost of Goods Sold)
b. This information reflects a periodic inventory system.
150 + 340 – 60 = 430 Cost of Goods Sold
Quick Study 5-4
a. This information reflects a periodic inventory system.
170 + 700 – 120 = 750 Cost of goods sold
b. This information reflects a perpetual inventory system.
200 + 1,000 – 75 = 1,125 Cost of Goods Sold
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
1
Last revised: October 26, 2012
Quick Study 5-5
May
1
14
15
30
Merchandise Inventory ................................................
Accounts Payable .................................................
To record purchase of merchandise; terms
1/10, n/30.
1,200
Accounts Payable ........................................................
Cash .......................................................................
To record payment of credit purchase.
1,200
Merchandise Inventory ................................................
Accounts Payable .................................................
To record purchase of merchandise; terms
2/15, n/30.
3,000
Accounts Payable ........................................................
Merchandise Inventory .........................................
Cash .......................................................................
To record payment of credit purchase within
discount period; $3,000 x 2% = $60 discount.
3,000
1,200
1,200
3,000
60
2,940
Quick Study 5-6
Aug.
2
4
17
Merchandise Inventory ................................................
Accounts Payable .................................................
To record purchase of merchandise; terms 1/5,
n/15.
14,000
Accounts Payable ........................................................
Merchandise Inventory .........................................
To record allowance regarding August 2 credit
purchase.
1,500
Accounts Payable ........................................................
Cash .......................................................................
To record payment of credit purchase less
allowance; 14,000 – 1,500 = 12,500.
12,500
14,000
1,500
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
12,500
2
Last revised: October 26, 2012
Quick Study 5-7
Mar.
5
Merchandise Inventory .........................................
2,000
Accounts Payable .........................................
To record purchase of merchandise; (500 × $5) × 80% = $2,000
7
Accounts Payable .................................................
Merchandise Inventory .................................
To record purchase return; (50/500) × $2,000 = $200
15
2,000
200
200
Accounts Payable .................................................
1,800
Cash ...............................................................
Merchandise Inventory .................................
To record payment within discount period;
$2,000 - $200 = $1,800; $1,800 – ($1,800 × 2%) = $1,764
1,764
36
Quick Study 5-8
Sept.
1
1
14
15
15
25
Accounts Receivable – JenAir ....................................
Sales .......................................................................
To record sale; terms 2/10, n/30.
6,000
Cost of Goods Sold ......................................................
Merchandise Inventory .........................................
To record cost of sales.
4,200
Cash ..............................................................................
Accounts Receivable – JenAir .............................
To record collection from credit customer.
6,000
Accounts Receivable – Dennis Leval .........................
Sales .......................................................................
To record sale; terms 2/10, n/30.
1,800
Cost of Goods Sold ......................................................
Merchandise Inventory .........................................
To record cost of sales.
1,500
Cash ..............................................................................
Sales Discounts ...........................................................
Accounts Receivable – Dennis Leval ..................
To record collection within discount period;
$1,800 x 2% = $36 discount.
1,764
36
6,000
4,200
6,000
1,800
1,500
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
1,800
3
Last revised: October 26, 2012
Quick Study 5-9
Oct.
15
15
16
25
Accounts Receivable – Leslie Garth ..........................
Sales .......................................................................
To record sale; terms 1/5, n/20.
900
Cost of Goods Sold ......................................................
Merchandise Inventory .........................................
To record cost of sales.
600
Sales Returns and Allowances ...................................
Accounts Receivable – Leslie Garth ...................
To record allowance.
100
Cash ..............................................................................
Accounts Receivable – Leslie Garth ...................
To record collection; 900 – 100 = 800.
800
900
600
100
800
Quick Study 5-10
Apr.
1
1
4
4
11
Accounts Receivable ............................................
Sales ...............................................................
To record credit sale.
2,000
Cost of Goods Sold ..............................................
Merchandise Inventory .................................
To record cost of sales.
1,400
Sales Returns and Allowances .............................
Accounts Receivable ....................................
To record sales return.
500
Merchandise Inventory .........................................
Cost of Goods Sold .......................................
To restore goods to inventory.
350
Cash .......................................................................
Sales Discounts ....................................................
Accounts Receivable .....................................
To record payment on account;
$2,000 – $500 = $1,500; $1,500 × 98% = $1,470.
2,000
1,400
500
350
1,470
30
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
1,500
4
Last revised: October 26, 2012
Quick Study 5-11
Sales .........................................................
Sales discounts .......................................
Sales returns and allowances .................
Net sales ...................................................
Cost of goods sold ..................................
Gross profit from sales ............................
Gross profit ratio ......................................
(a)
(b)
(c)
(d)
$130,000
(4,200)
(17,000)
$108,800
(76,600)
$ 32,200
29.60%1
$512,000
(16,500)
(5,000)
$490,500
(326,700)
$163,800
33.39%2
$35,700
(400)
(5,000)
$30,300
(21,300)
$ 9,000
29.70%3
$245,700
(3,500)
(700)
$241,500
(125,900)
$115,600
47.87%4
Gross profit ratio calculations*:
1. ($32,200/$108,800) x 100 = 29.60%
2. ($163,800/$490,500)) x 100 = 33.39%
3. ($9,000/$30,300) x 100 = 29.70%
4. ($115,600/$241,500) x 100 = 47.87%
*rounded to two decimal places
Quick Study 5-12
July
31
Cost of Goods Sold ..............................................
Merchandise Inventory .................................
To adjust for shrinkage; $34,800 – $32,900 = $1,900
1,900
1,900
Gross profit from sales = Net sales – Cost of goods sold
= (157,200 – 1,700 – 3,500) – (102,000 + 1,900)
= 152,000 – 103,900
= 48,100
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
5
Last revised: October 26, 2012
Quick Study 5-13
a. Classified Multi-Step Income Statement
JETCO
Income Statement
For Year Ended December 31, 2014
Sales ....................................................................................
Less: Sales discounts .......................................................
Net sales ..............................................................................
Cost of goods sold .............................................................
Gross profit from sales ......................................................
Operating expenses:
Selling expenses:
Sales salaries expense ...............................................
Advertising expense ...................................................
Total selling expenses ................................................
General and administrative expenses:
Office salaries expense...............................................
Office supplies expense .............................................
Total general and administrative expenses ..............
Total operating expenses...............................................
Income from operations.....................................................
Other revenues/expenses:
Interest revenue .............................................................
Net income ..........................................................................
$100
4
$ 96
60
$ 36
$ 15
6
$ 21
$ 10
3
13
34
$ 2
5
$ 7
b. Single-Step Income Statement
JETCO
Income Statement
For Year Ended December 31, 2014
Revenues:
Net sales .........................................................................
Interest revenue .............................................................
Total revenues ...............................................................
Expenses:
Cost of goods sold ........................................................
Selling expenses ...........................................................
General and administrative expenses .........................
Total expenses ...............................................................
Net income ..........................................................................
$ 96
5
$101
$ 60
21
13
94
$ 7
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
6
Last revised: October 26, 2012
Quick Study 5-14
($248,000 – $114,080)/$248,000 = 0.54 or 54%
This means that Willaby realizes a gross margin of 54¢ for each $1 of sales. Willaby’s
gross profit ratio of 54% is favourable in comparison to the industry average of 53%, or
53¢ for each $1 of sales.
Quick Study 5-15
Dec.
31
31
31
31
Sales .......................................................................
Income Summary ...........................................
To close Sales.
70
Income Summary ..................................................
Sales Discounts ............................................
Sales Returns and Allowances ....................
Cost of Goods Sold........................................
Depreciation Expense ...................................
Advertising Expense .....................................
To close income statement accounts with
debit balances.
41
Income Summary ..................................................
Tony Ingram, Capital......................................
To close income summary account to capital.
29
Tony Ingram, Capital ............................................
Tony Ingram, Withdrawals ............................
To close withdrawals account to capital.
1
70
3
4
25
2
7
29
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
1
7
Last revised: October 26, 2012
*Quick Study 5-16
a. QS5-5 – Periodic
May
1
14
15
30
Purchases .....................................................................
Accounts Payable .................................................
To record purchase; terms 1/10, n/30.
1,200
Accounts Payable ........................................................
Cash .......................................................................
To record payment of credit purchase.
1,200
Purchases .....................................................................
Accounts Payable .................................................
To record purchase; terms 2/15, n/30.
3,000
Accounts Payable ........................................................
Purchase Discounts ..............................................
Cash .......................................................................
To record payment within discount period;
$3,000 x 2% = $60 discount.
3,000
1,200
1,200
3,000
60
2,940
b. QS5-6 – Periodic
Aug.
2
4
17
Purchases .....................................................................
Accounts Payable .................................................
To record purchase; terms 1/5, n/15.
14,000
Accounts Payable ........................................................
Purchase Returns and Allowances .....................
To record allowance.
1,500
Accounts Payable ........................................................
Cash .......................................................................
To record payment less allowance.
12,500
14,000
1,500
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
12,500
8
Last revised: October 26, 2012
*Quick Study 5-16 (concluded)
c. QS5-7 - Periodic
Mar.
5
7
15
Purchases .....................................................................
Accounts Payable ................................................
(500 × $5) × 80% = $2,000
2,000
Accounts Payable ........................................................
Purchase Returns and Allowances .....................
(50/500) × $2,000 = $200
200
Accounts Payable ........................................................
Cash ......................................................................
Purchase Discounts ............................................
$1,800 – ($1,800 × 2%) = $1,764
1,800
2,000
200
1,764
36
*Quick Study 5-17
a. QS5-8 - Periodic
Sept.
1
14
15
25
Accounts Receivable – JenAir ....................................
Sales .......................................................................
To record sale; terms 2/10, n/30.
6,000
Cash ..............................................................................
Accounts Receivable – JenAir .............................
To record collection from credit customer.
6,000
Accounts Receivable – Dennis Leval .........................
Sales .......................................................................
To record sale; terms 2/10, n/30.
1,800
Cash ..............................................................................
Sales Discounts ...........................................................
Accounts Receivable – Dennis Leval ..................
To record collection within discount period;
$1,800 x 2% = $36 discount.
1,764
36
6,000
6,000
1,800
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
1,800
9
Last revised: October 26, 2012
*Quick Study 5-17 (concluded)
b. QS5-9 - Periodic
Oct.
15
16
25
Accounts Receivable – Leslie Garth ............................
Sales .......................................................................
To record sale; terms 1/5, n/20.
900
Sales Returns and Allowances .....................................
Accounts Receivable – Leslie Garth....................
To record sales allowance.
100
Cash ................................................................................
Accounts Receivable – Leslie Garth....................
To record payment less allowance.
800
900
100
800
c. QS5-10 - Periodic
Apr.
1
4
11
Accounts Receivable .....................................................
Sales .......................................................................
To record sales; terms 2/10, EOM.
2,000
Sales Returns and Allowances .....................................
Accounts Receivable ............................................
To record sales return; returned to inventory.
500
Cash ................................................................................
Sales Discounts .............................................................
Accounts Receivable ............................................
To record payment less return and discount.
1,470
30
2,000
500
1,500
*Quick Study 5-18
Merchandise inventory, January 1, 2014 .....................................
Purchases.......................................................................................
Less: Purchase discounts ...........................................................
Add: Transportation-in .................................................................
Net Purchases ................................................................................
Cost of Goods Available for Sale .................................................
Less: Merchandise inventory, December 31, 2014 ....................
Cost of Goods Sold .......................................................................
$ 40,000
$180,000
1,400
14,000
192,600
$232,600
22,000
$210,600
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
10
Last revised: October 26, 2012
*Quick Study 5-19
Dec
31
31
31
31
Sales ................................................................................
Purchase Discounts.......................................................
Merchandise Inventory ..................................................
Income Summary...................................................
To close all credit balance temporary accounts.
450,000
1,400
22,000
Income Summary ...........................................................
Merchandise Inventory .........................................
Sales Returns and Allowances ............................
Purchases ..............................................................
Transportation-In ...................................................
Salaries Expense ...................................................
Depreciation Expense ...........................................
To close all debit balance temporary accounts.
412,000
Income Summary ...........................................................
Kay Bondar, Capital ..............................................
To close the income summary to capital.
61,400
Kay Bondar, Capital .......................................................
Kay Bondar, Withdrawals .....................................
To close the withdrawals account to capital.
65,000
473,400
40,000
27,000
180,000
14,000
120,000
31,000
61,400
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
65,000
11
Last revised: October 26, 2012
*Quick Study 5-20
Sales ..........................................................
Sales discounts ........................................
Net Sales ...................................................
a
$130,000
(4,200)
$125,800
b
$512,000
(16,500)
$495,500
c
$35,700
(400)
$35,300
d
$245,700
(3,500)
$242,200
Merchandise inventory, Jan. 1, 2014 ......
Purchases .................................................
Purchase returns and allowances ..........
Cost of goods available for sale .............
Merchandise inventory, Dec. 31, 2014 ....
Cost of goods sold ...................................
$ 8,000
120,000
(4,000)
$124,000
(7,500)
$116,500
$ 21,000
350,000
(14,000)
$357,000
(22,000)
$335,000
$ 1,500
29,000
(750)
$29,750
(900)
$28,850
$
4,300
131,000
(3,100)
$132,200
(4,100)
$128,100
Gross profit from sales ............................
Gross profit ratio ......................................
$ 9,300
7.39%1
$160,500
32.39%2
$ 6,450
18.27%3
$114,100
47.11%4
Calculations*:
1. 9,300/125,800 x 100 = 7.39%
2. 160,500/495,500 x 100 = 32.39%
3. 6,450/35,300 x 100 = 18.27%
4. 114,100/242,200 x 100 = 47.11%
*Rounded to two decimal places
*Quick Study 5-21
Mar.
1
Merchandise Inventory ...........................................
GST Receivable .......................................................
Accounts Payable ...........................................
To record credit purchase; $5,000 x 5% = 250 GST.
5,000
250
5,250
*Quick Study 5-22
Mar.
17
17
Accounts Receivable ..............................................
PST Payable .....................................................
GST Payable ....................................................
Sales .................................................................
To record credit sale; $5,800 x 7% = $406 PST;
$5,800 x 5% = $290 GST.
6,496
Cost of Goods Sold .................................................
Merchandise Inventory ...................................
To record cost of sale.
5,000
406
290
5,800
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
5,000
12
Last revised: October 26, 2012
*Quick Study 5-23
Mar.
1
Purchases ..............................................................
GST Receivable .....................................................
Accounts Payable .........................................
To record credit purchase; $5,000 x 5% = 250 GST.
5,000
250
5,250
*Quick Study 5-24
Mar.
17
Accounts Receivable ............................................
PST Payable ...................................................
GST Payable ..................................................
Sales ...............................................................
To record credit sale; $5,800 x 7% = $406 PST;
$5,800 x 5% = $290 GST.
6,496
Quick Study Solutions to accompany Fundamental Accounting Principles, 14th Canadian Edition. © 2013 McGraw-Hill Ryerson Ltd.
406
290
5,800
13