Chapter 4 solutions and check figures:
E 4-2 The information below is taken from the trial balance of the Karo Company:
debits
Sales
COGS
Insurance Expense
Utilities Expense
Advertising Expense
Salaries Expense
Interest Expense
credits
114.000
49.000
21.000
18.000
15.000
23.000
12.000
Karo Company
Income Statement
for the period xx
Revenues:
Sales
Expenses:
COGS
Insurance Expense
Utilities Expense
Advertising Expense
Salaries Expense
Interest Expense
Net Income (Net Loss)
114.000
49.000
21.000
18.000
15.000
23.000
12.000
138.000
-24.000
Karo Company
Income Statement
for the period xx
Sales
COGS
Gross
Margin
Operating Expenses:
Insurance Expense
Utilities Expense
Advertising Expense
Salaries Expense
Operating Income (Loss)
Interest Expense
Net Income (Net Loss)
114.000
49.000
65.000
21.000
18.000
15.000
23.000
77.000
-12.000
12.000
(24.000)
E 4-6 Fill in the blanks in the following income statements for Angora Company
Gross Sales
Sales Returns and Allowances
Net Sales
Merchandise Inventory, beginning
Purchases
Purchases Returns and Allowances
Freight in
Net Cost of Purchases
Goods Available for Sale
Merchandise Inventory, Ending
Cost of Goods Sold
Gross Margin
Selling Expenses
General and Admin. Expenses
Total Operating Expenses
Net Income
2000
698
48
650
66
384
62
56
378
444
78
366
284
182
78
260
24
2001
1.008
57
951
51
507
9
87
585
636
99
537
414
234
150
384
30
2002
389
52
337
47
170
21
18
167
214
51
163
174
92
51
143
31
E 4-7 Prepare the journal entries for the following transactions assuming:
(1) The periodic inventory system and
(2) The perpetual inventory system.
a. Purchased merchandise on credit, terms n/30 FOB shipping point, TL 7.500.
b. Paid the freight on the shipment in transaction a, TL 405.
c. Purchased merchandise on credit, terms n/30, FOB destination, TL 4.200.
d. Purchased merchandise on credit, terms, n/30, FOB shipping point, TL 7.800, which
includes freight paid by the supplier of TL 600.
e. Returned part of the merchandise purchased in transaction c, TL 1.500.
f. Paid the amount owed on the purchase in transaction a.
g. Paid the amount owed on the purchase in transaction d.
h. Paid the amount owed on the purchase in transaction c, less the return in e.
(1)
Date
a.
Account
Purchases
Accounts Payable
b.
Freight In
Cash
c.
d.
e.
f.
g.
h.
Debit Credit
7.500
7.500
405
405
Purchases
Accounts Payable
4.200
Purchases
Freight In
Accounts Payable
7.200
600
Accounts Payable
Purchase Returns and Allowances
1.500
Accounts Payable
Cash
7.500
Accounts Payable
Cash
7.800
Accounts Payable
Cash
2.700
4.200
7.800
1.500
7.500
7.800
2.700
(2)
Date
a.
Account
Inventory
Accounts Payable
b.
Inventory
Cash
c.
d.
e.
f.
Debit Credit
7.500
7.500
405
405
Inventory
Accounts Payable
4.200
Inventory
Accounts Payable
7.800
Accounts Payable
Inventory
1.500
Accounts Payable
Cash
7.500
4.200
7.800
1.500
7.500
g.
h.
Accounts Payable
Cash
7.800
Accounts Payable
Cash
2.700
7.800
2.700
E 4-8 Present the general journal entries necessary to correct each of the following errors. All
of the errors have been posted and the books are not closed yet.
a. A cash refund of TL 15 received for an overcharge on a purchase of inventory was
recorded as a sale of merchandise for cash.
Account Name
Sales
Purchase Discounts
Debit Credit
15
15
b. A cash sale of TL 50 to a customer was recorded as a sale on account to the same
customer.
Account Name
Debit Credit
Cash
50
Accounts Receivable
50
c. TL 30 was received from a customer on account and was recorded as a cash sale.
Account Name
Debit Credit
Sales
15
Purchase Discounts
15
d. A TL 400 sale to a customer on credit, FOB shipping point, with prepaid delivery
expense of TL 25, was recorded as a TL 425 debit to Accounts Receivable, and a
credit of TL 425 to the Inventory account.
Account Name
Debit Credit
Inventory
425
Sales
400
Prepaid Delivery Expense
25
e. A cash receipt of TL 990 (TL 1.000 less 1% discount) was recorded as a debit of TL
990 to cash and Accounts Receivable.
Account Name
Debit Credit
Sales discounts
10
Accounts Receivable
10
Baha
AŞ
Income Statement
For the Month of September
(in TL)
PERPETUAL
Sales
Less:Sales Discounts
Sales Returns and Allowances
Net Sales
Cost of Goods Sold
Gross Margin
Operating Expenses
Selling Expenses
Freight-out
Administrative Expenses:
Rent Expense
Salary Expense
Insurance Expense
Operating Profit
Other expenses and losses
Interest Expense
Net Income (Loss)
156.000
4.000
6.500
3.500
3.500
10.000
30.500
6.000
46.500
10.500
145.500
100.500
45.000
50.000
(5.000)
2.000
(7.000)
MERHANDISE INVENTORY
beg bal
purchases
freight in
0
100.000
5.000
ending inv
0
1.500 purchase discounts
3.000 purchase returns
100.500 COGS
COGS= bb + purch+freight in - ending balance-purc dis -purch returns
P 4-2 Baha AŞ had the following results in September 2007.
Account
Freight-in
Sales Returns and
Allowances
Purchases
Purchase Discounts
Interest Expense
Rent Expense
TL
Account
5.000 Freight-out
6.500 Purchases Returns and
Allowances
100.000 Sales
1.500 Sales Discounts
2.000 Insurance Expense
10.000 Salary Expense
Baha AŞ
TL
3.500
3.000
156.000
4.000
6.000
30.500
PERIODIC
Income Statement
For the Month of September
(in TL)
Sales
Less:Sales Discounts
Sales Returns and Allowances
Net Sales
COGS:
Beginning Inventory
Purchases
Less:Purchase Discounts
Purchase Returns and Allowances
Net Purchases
Freight-in
Cost of Goods Purchased
Cost of Goods Available For Sale
Ending Inventory
Gross Margin
Operating Expenses
Selling Expenses
Freight-out
Administrative Expenses:
Rent Expense
Salary Expense
Insurance Expense
Operating Profit
Other expenses and losses
Interest Expense
Net Income (Loss)
156.000
4.000
6.500
10.500
145.500
100.000
1.500
3.000
4.500
95.500
5.000
100.500
100.500
-
3.500
10.000
30.500
6.000
100.500
45.000
3.500
46.500
50.000
- 5.000
-
2.000
7.000
P4-7
Bonibonu Company
Income Statement
Sales
Merchandise Inventory, beginning
210,000
52,300
Purchases
133,000
Merchandise Inventory, ending
(51,400)
COGS
133,900
Gross Profit
Sales salary expenses
Advertising Expenses
Delivery Expenses
Depreciation Expense
76,100
22,430
2,310
1,600
1,950
Store Supplies Expense
370
Total selling expenses
28,660
Rent Expense
Office Salaries
Insurance Expense
Total general expenses
8,400
7,200
1,130
16,730
Operating Income
30,710
Loss on disposal of equipment
Other Expenses
Income before tax
230
1,650
28,830
Bonibonu Company
Balance
Sheet
Cash
9,220
Accounts Payable
Accounts Receivable
23,700
Salaries Payable
Merchandise Inventory
51,400
Dividends Payable
Prepaid Insurance
Store Supplies
1,380
6,100
430
4,000
Total Liabilities
10,530
250
Store Equipment
24,600
Common Stock
50,000
Accum. Depr. Store Equipment
(4,350)
Retained Earnings
45,670
Total Equity
95,670