Chapter 5 Accounting for Merchandising Operations QUCIK STUDY QS 5-1 Prepare journal entries to record each of the following purchases transactions of a merchandising company. Show supporting calculations and assume a perpetual inventory system. Mar. 5 Purchased 1,000 units of product at a cost of $12 per unit. Terms of the sale are 2/10, n/60; the invoice is dated March 5. Mar. 7 Returned 50 defective units from the March 5 purchase and received full credit. Mar. 15 Paid the amount due from the March 5 purchase, less the return on March 7. QS 5-2 Prepare journal entries to record each of the following sales transactions of a merchandising company. Show supporting calculations and assume a perpetual inventory system. Apr. 1 Sold merchandise for $5,000, granting the customer terms or 2/10, ROM; invoice dated April 1. The cost of merchandise is $3,000. Apr. 4 The customer in the April 1 sale returned merchandise and receive credit for $1,000, The merchandise, which had cost $600, is returned to inventory. Apr. 11 Received payment for the amount due from the April 1 sale less the return on April 4. QS 5-3 Crystal Company ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balance(Crystal uses the perpetual inventory system). Merchandise inventory B. Crystal, Capital Sales Sales discounts $42,000 124,900 275,300 55,200 Sales returns and allowances Cost of goods sold Depreciation expense Salaries expense Miscellaneous expense $ 7,600 115,000 12,000 45,000 7,000 A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $40,600. Prepare the entry to record any inventory shrinkage. EXERCISES Exercises 5-1 Prepare journal entries to record the following transactions for a retail store. Assume a perpetual inventory system. Apr. 2 Purchased merchandise from Johns Company under the following terms: $5,900 price, invoice dated April 2, credit terms of 2/15, n/60, and FOB shipping point. 3 Paid $330 for shipping charges on the April 2 purchase. 4 Returned to Johns Company unacceptable merchandise that had an invoice price of $900. 17 Sent a check to Johns Company for the April 2 purchase, net of the discount and the returned merchandise. 18 Purchased merchandise from William Corp. Under the following terms; $12,250, invoice dated April 18, credit terms of 2/10, n/30, and FOB destination. 21 After negotiations, received from William a $3,250 allowance on the April 18 purchase. 28 Sent check to William paying for the April 18 purchase, net of the discount and allowance. Exercises 5-8 The following list includes selected permanent accounts and all of the temporary accounts from the December 31, 2009, unadjusted trial balance of Yamiko Co., a business owned by Kumi Yamiko. Use these account balances along with the additional information to journalize (a) adjusting entries and (b) closing entries. Yamiko Co. uses a perpetual inventory system. Merchandise inventory Prepaid selling expense K.Yamiko, withdrawals Sales Sales returns and allowance Sales discounts Cost of goods sold Sales salaries expense Utilities expense Selling expense Administrate expense Debit $ 30,200 4,000 1,600 Credit $ 543,000 20,656 5,783 267,451 59,796 17,395 46,749 120,135 Additional Information Accrued sales salaries amount to $1,700. Prepare selling expenses of $1,600 have expired. A physical count of year-end merchandise inventory shows $29,626 of goods still available. Exercises 5-9 Journalize the following merchandising transactions for Chiller Systems assuming it uses a perpetual inventory system. 1. On October 1, Chiller Systems purchases merchandise for $2,800 on credit with terms of 2/5, n/30, FOB shipping point; invoice dated November 1. 2. On October 5, Chiller Systems pays cash for the November 1 purchase. 3. On October 7, Chiller Systems discovers and returns $100 of defective merchandise purchased on November 1 for a cash refund. 4. On October 10, Chiller Systems pays $140 cash for transaction costs with the November 1 purchase. 5. On October 13, Chiller Systems sells merchandise for $3,024 on credit. The cost of merchandise is $1,512. 6. On October 16, the customer returns merchandise from the November 13 transaction. The returned items sell for $205 and cost $115. PROBLEM Problem 5-3A Rusio Company's adjusted trial balance on August 31, 2009, its fiscal year-end, follows. Merchandise inventory Other (noninventory) assets Total liabilities C.Rusio, Capital C.Rusio, Withdrawals Sales Sales discounts Sales returns and allowances Cost of goods sold Sales salaries expense Rent expense—Selling space Store supplies expense Advertising expense Office salaries expense Rent expense—Office space Office supplies expense totals Debits $ 43,500 174,000 Credits $ 50,242 142,036 8,000 297,540 ,4,552 19,637 114,571 40,762 13,984 3,570 25,290 37,192 3,570 1,190 $489,818 $489,818 On August 31, 2008, merchandise inventory was $35,104. Supplementary records of merchandising activities for the year ended August 31, 2009, reveal the following itemized costs. Invoice cost of merchandise purchases Purchase discounts received Purchase returns and allowances Costs of transportation-in $127,890 2,685 6,138 3,900 Required 1. Compute the company's net for the year. 2. Compute the company's total cost of merchandise purchased for the year. 3. Prepare a multiple-step income statement that includes separate categories for selling expense and for general and administrate expenses. 4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expense, and general and administrate expensrs.