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.