Supplemental Instruction Handouts Financial Accounting Review of Chapters 5, 6, 7 and Appendix II

Transcription

1 Supplemental Instruction Handouts Financial Accounting Review of Chapters 5, 6, 7 and Appendix II 1. The following transactions were recorded by Carmen s Antique Shop for the month of June. June 1 st purchased merchandise from Dave s Wholesalers for $2,500 under credit terms of 2/10, n/30, and FOB shipping point. June 2 nd received the merchandise and a bill for shipping of $150 from Ron s Shipping Company. The bill was paid when received. June 3 rd sold $500 worth of antiques for cash. The cost was $250. June 5 th sold $750 worth of antiques on credit to Mrs. Burns with credit terms of 3/10, n/30 FOB destination. The cost was $450. June 6 th paid $100 for the delivery of antiques to Mrs. Burns. June 6 th received a $500 credit memorandum from Dave s Wholesalers for a return of unsatisfactory antiques. June 11 th made a payment to Dave s Wholesalers less the return and applicable discount. June 12 th made a sale to Mr. Ireland for $600 with credit terms of 3/10, n/30 FOB shipping point. The cost was $400. June 15 th received payment from Mrs. Burns regarding the June 5 th sale. June 18 th issued a credit memorandum for $200 to Mr. Ireland for return of unsatisfactory antiques. The antiques were destroyed beyond repair and were thrown out. June 30 th received payment from Mr. Ireland regarding the June 12 th sale. Required: Prepare general journal entries for Carmen s antique shop using the perpetual inventory system for merchandising transactions. Use a separate account for each receivable and payable.

2 General Journal Page 1 Date Account Titles and Explanations PR Debit Credit

3 General Journal Page 2 Date Account Titles and Explanations PR Debit Credit

4 2. Information for Kira s Flower Shop for December 31, 2019, please note, all accounts have normal balances: Advertising Expense $4,500 Depreciation Expense, Office Equipment $800 Depreciation Expense, Store Equipment $3,600 Interest Expense $900 Kira Clarridge, Capital $65,000 Kira Clarridge, Withdrawals $25,000 Liabilities $22,000 Merchandise Inventory January 1 st, 2019 $18,550 Office Rent Expense $9,000 Office Supplies Expense $1,250 Office Telephone Expense $800 Office Salaries Expense $15,100 Other Assets $68,650 Purchase Discounts $6,800 Purchase Returns and Allowances $1,250 Purchases $45,800 Sales $165,245 Sales Discounts $2,250 Sales Returns and Allowances $750 Store Rent Expense $24,000 Store Supplies Expense $750 Store Telephone Expense $345 Store Wages Expense $35,000 Transportation In $3,250 The ending Merchandise Inventory account for December 31 st, 2019, shows a balance of $19,350. Required: Prepare a classified, multiple step income statement.

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6 3. Indicated below is the December 31 st, 2019 inventory of the Goodale Inc. Also, the current replacement costs are given. Items: Units Unit Cost NRV A 6,000 $10 $12 B 4,000 $8 $6 C 12,000 $6 $4 D 2,000 $4 $2 Total Total Unit Cost Total NRV A Individual Item B Inventory as a whole Required: A) Calculate the lower of cost or NRV for each individual inventory item. B) Calculate the lower of cost or NRV for the inventory as a whole. C) Prepare the necessary year ended adjusting entry based on your answer from part A. General Journal Page Date Account Titles and Explanations PR Debit Credit

7 4. The Flutie Company completed these transactions during March of the current year: March 2 sold merchandise to Leo Hazard, invoice 840, $15,800. Cost of the merchandise was $10,400. Terms of the credit sale are 2/10, n/30. March 3 purchased $1,200 of office supplies on credit from Able Company. The invoice was dated March 3 with terms of n/30. March 5 purchased $42,600 of merchandise. The invoice is dated March 3 with terms of 2/10, n/30 from Defoe Industries. March 9 purchased $20,850 of office equipment (account number 165) on credit from Jet Supply. The invoice was dated March 9 with terms of n/30. March 10 sold $4,600 of merchandise on credit to Major Cobb using invoice 841. The cost of the merchandise was $3,200. Terms of the credit sale are 2/10, n/30. March 12 received payment from Leo Hazard for the March 2 sale less any applicable discounts. March 13 sent Defoe Industries cheque #416 in payment of the March 3 invoice. March 14 purchased $31,625 of merchandise. The invoice has credit terms of 2/10, n/30 from Wells Company. The invoice was dated March 13. March 15 issued cheque #417 to pay the sales salaries (account number 621) for the first half of the month. The cheque was made out to Payroll for $15,900. March 15 cash sales for the first half of the month were $134,680. Cost of the merchandise was $95,680. March 17 received a credit memorandum from the Wells Company for a return of $2,425 of unsatisfactory merchandise purchased on March 14. March 19 received a credit memorandum from Jet Supply for a return of $630 of office equipment purchased on March 9. March 20 received a payment from Major Cobb for the sale of March 10. March 23 issued cheque #418 to the Wells Company in payment of the March 13 invoice. March 31 issued cheque #419 to pay the sales salaries (account number 621) for the last half of the month. The cheque was made out to Payroll for $15,900. Required: Journalize these transactions into the appropriate special journal. The Flutie Company uses a perpetual inventory system.

8 Date Account Debited Invoice Number PR Sales Journal Page 3 Accounts Receivable Dr Sales CR Cost of Goods Sold Dr Merchandise Inventory CR Date Account Debited Date of Invoice Terms PR Merchandise Inventory Dr Purchases Journal Page 3 Office Supplies DR Other Accounts DR Accounts Payable CR

9 Date Account Credited Cash Receipts Journal Page 3 Sales Accounts Sales Discount Receivable DR Cr CR Explanation PR Cash DR Other Accounts CR COGS DR Merch. Inv. CR Date Ch. No. Payee Cash Disbursements Journal Page 3 Account PR Cash Debited CR Merchandise Inventory CR Accounts Payable DR Other Accounts DR

10 General Journal Page Date Account Titles and Explanations PR Debit Credit

11 5. A fire destroyed the inventory of Abba Cadabba on April 15. The following data were found to be in the accounting records: January 1 Inventory $20,000 Purchases from January to April 15 $38,000 Sales from January 1 to April 15 $86,000 The Company has an estimated gross profit rate of 54%. Required: Calculate the amount of inventory destroyed in the fire using the Gross Profit Method.

12 6. The information below pertains to one particular item of inventory for the month of August 2019: August Units Unit Cost 1 Beginning Balance 125 $ Purchased 150 $ Sold Purchased 125 $ Sold Purchased 75 $1.30 Using this information and the space provided, calculate the value of the cost of goods sold and ending inventory. A) Use the moving weighted average method. Date Purchases Sales (At Cost) Ending Inventory B) Use the Perpetual FIFO method. Date Purchases Sales (At Cost) Ending Inventory

13 7. In October Joe s Fix It Shop decided to set up a petty cash fund to pay for small items. October 1 established a $400 petty cash fund. October 31 replenished the fund and found the following receipts that need to be journalized: From: October 5 paid $45 for office supplies. October 14 paid $35 for postage stamps. October 25 paid $80 for freight charges on merchandise purchased for sale. Note: Joe s Fix It Shop uses the perpetual inventory system. October 29 paid $25 for a cake for Joe s birthday. Use food and drink expense as the debit. Also, the Petty Cashier noted that there was $210 cash in the petty cash box. Joe decided to reduce the petty cash fund to $300. Required: Prepare the necessary journal entries on October 1 st and October 31 st. General Journal Page Date Account Titles and Explanations PR Debit Credit

14 8. Smith Company s cash account in the general ledger at November 30, 2019 appears as follows: Date Explanation PR Debit Credit Balance 2019 Oct 31 Balance $15, Nov 30 CR8 $19, $35, CD9 $20, $14, Deposits for November Cheques written for November 2-Nov $6, $5, Nov 3, , Nov 4, , Nov 4, , Total $19, , , , , Total $20, The bank statement appears as follows: Bank Statement To: Smith Company 30-Nov-19 Royal Bank Cheques/Charges Deposits/Credits Balance 15, Nov $3, Nov 6, , Nov 5, Nov 3, , CM 16-Nov Nov 4, , Nov 3, Nov 4, , Nov , Nov 1, , INT 30-Nov , INT = Interest Paid CM = Collection Fee Required: Prepare a bank reconciliation and the necessary general journal entries. Please note that Smith Company had no deposits in transit from October. Also note, Smith Company had no outstanding cheques from October. In reviewing the bank statement, the bookkeeper discovered the following mistakes: Cheque #102 was recorded properly by the book keeper but incorrectly by the bank. Cheque #105 for office equipment was recorded incorrectly in the cash disbursements journal. On November 16 the bank collected a note receivable for Smith Company. The bank charged Smith Company a $50 service charge for processing the payment. Smith Company has a note payable with the bank and the bank collects $30 at the end of this month.

15 General Journal Page Date Account Titles and Explanations PR Debit Credit