2 Cost of Goods Sold 600,000 Merchandise Inventory 600,000 to record cost of goods sold above

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1 CHAPTER 5 BE5-1 Cost of Gross Operating Net Sales Goods Sold Profit Expense Income a) $75,000 $43,500 $31,500 $20,700 $10,800 b) $108,000 $70,000 $38,000 $8,500 $29,500 c) $181,500 $71,900 $109,600 $37,500 $70,100 BE5-2 a) March 2 Merchandise Inventory 900,000 A/P - Hunt Company 900,000 purchased goods on account b) March 6 A/P - Hunt Company 130,000 Merchandise Inventory 130,000 returned goods c) March 31 A/P - Hunt Company 770,000 Cash 770,000 paid on account BE5-3 a) March 2 A/R - Rowen Company 900,000 Sales 900,000 sold goods on account 2 Cost of Goods Sold 600,000 Merchandise Inventory 600,000 b) March 6 Sales Returns & Allowances 130,000 A/R - Rowen Company 130,000 received returned goods on credit 6 Merchandise Inventory 90,000 Cost of Goods Sold 90,000 to record cost of goods returned above c) March 31 Cash 770,000 A/R - Rowen Company 770,000 received cash on account

2 BE5-4 Keo Company Buyer Mayo Company Seller Nov. 12 Merchandise Inventory 900 Nov. 12 Cash 900 Cash 900 Sales 900 bought goods sold goods Nov. 12 Cost of Goods Sold 700 Merchandise Inv. 700 BE5-5 March 3 Merchandise Inventory 500 A/P 500 bought goods on account (20 units) 6 A/P 75 Merchandise Inventory 75 returned goods on account (3 units) 21 A/R 675 Sales 675 sold goods on account (15 units) 21 Cost of Goods Sold 375 Merchandise Inventory units left on hand ( ) Inventory Cost = $50 (2 units x $25 or $ ) BE5-6 Aug. 31 Cost of Goods Sold 900 Merchandise Inventory 900 to record difference between records & inventory on hand BE5-7 July 31 Sales 180,000 Prasad, Capital 180,000 to close temporary credit accounts 31 Prasad, Capital 102,000 Sales Returns & Allowances 2,000 Cost of Goods Sold 100,000 to close temporary debit accounts

3 BE5-8 Sales Revenue: Sales $400,000 Less: Sales Returns & Allowances 30,000 Net Sales 370,000 BE5-9 Multi-step Single-step a) -other Revenues & Gains -Revenues b) -Other Expenses & Losses -Expenses c) -Cost of Goods Sold -Expenses d) -other Revenues & Gains -Revenues BE5-10 a) Sales $500,000 Less: Sales Returns & Allowances 15,000 Net Sales 485,000 b) Net Sales $485,000 Cost of Goods Sold 340,000 Gross Profit 145,000 c) Gross Profit $145,000 Selling Expenses 70,000 Administrative Expenses 40,000 Net Income $35,000 BE5-11 a) Gross Profit Margin = Gross Profit Net Sales = 250, ,000 = 45.50% b) Inventory Turnover = Cost of Goods Sold Average Inventory = 300,000 25,000 = times c) Days Sales In = Days in Year Inventory Inventory Turnover = 365 days times = 30 days

4 E5-1 April 5 Merchandise Inventory 18,000 A/P - DeVito Company 18,000 purchased goods on account 6 Merchandise Inventory 900 Cash 900 paid freight charges on goods 7 Equipment 26,000 A/P 26,000 bought equipment on account 8 A/P - DeVito Company 3,000 Merchandise Inventory 3,000 returned damaged goods on account May 2 A/P - DeVito Company 15,000 Cash 15,000 paid on account E5-2 a) Pippen Company - seller Dec. 3 A/R - Thomas Co. 400,000 Sales 400,000 sold goods on account 3 Cost of Goods Sold 320,000 Merchandise Inventory 320,000 8 Sales R & A 20,000 A/R - Thomas Co. 20,000 to record allowance for defective goods (not returned) 31 Cash 380,000 A/R - Thomas Co. 380,000 cash received on account b) Thomas Co. - buyer Dec. 3 Merchandise Inventory 400,000 A/P - Pippen Company 400,000 bought goods on account 8 A/P - Pippen Company 20,000 Merchandise Inventory 20,000 received a discount for defective merchandise (not returned) 31 A/P - Pippen Company 380,000 Cash 380,000 paid on account

5 E5-3 Sept. 6 Merchandise Inventory 1200 A/P - Digital Co bought goods on account (60) 10 A/P - Digital Co. 40 Merchandise Inventory 40 returned goods on account (2) 12 A/R - Campus News 780 Sales 780 sold goods on account (26) 12 Cost of Goods Sold 520 Merchandise Inventory Sales R & A 30 A/R - Campus News 30 received one item back for credit 14 Merchandise Inventory 20 Cost of Goods Sold 20 to record return of one item above 20 A/R - Campus Testing Services 900 Sales 900 sold goods on account (30) 20 Cost of Goods Sold 600 Merchandise Inventory 600

6 E5-4 Sept. 2 Merchandise Inventory 1350 A/P - Digital Inc bought goods on account (90) 5 A/P - Digital Inc. 60 Merchandise Inventory 60 returned 4 desk sets for credit 8 A/R - University Bookstore 1250 Sales 1250 sold 50 desk sets on account 8 Cost of Goods Sold 750 Merchandise Inventory A/R - Hilltop Card Shop 750 Sales 750 sold 30 desk sets on account 12 Cost of Goods Sold 450 Merchandise Inventory Merchandise Inventory 240 A/P - Sterling Company 240 bought goods on account (15) 30 Cost of Goods Sold (Inventory Loss) 15 Merchandise Inventory 15 to record loss of one desk set (missing) E Sales Returns & Allowances 150 Sales 150 to correct entry 2. Supplies 250 Cash 250 A/P 250 Merchandise Inventory 250 to correct entry 3. Sales 50 Merchandise Inventory 50 to correct entry 4. Cash 270 Merchandise Inventory 270 to correct entry

7 E5-6 a) June 10 Merchandise Inventory 5,000 A/P - Duvall Company 5,000 bought goods on account 11 Merchandise Inventory 300 Cash 300 paid freight charges on goods 12 A/P - Duvall Company 500 Merchandise Inventory 500 returned goods for credit July 7 A/P - Duvall Company 4,500 Cash 4,500 paid on account 15 Cash 8,500 Sales 8,500 sold goods for cash 15 Cost of Goods Sold 4,800 Merchandise Inventory 4,800 b) July 31 Sales 8,500 Capital 8,500 to close temporary credit accounts 31 Capital 4,800 Cost of Goods Sold 4,800 to close temporary debit accounts E5-7 a) Sales Revenue Sales $900,000 Less: Sales Returns & Allowances 24,000 Net Sales 876,000 b) Oct. 31 Sales 900,000 Capital 900,000 to close credit temporary accounts 31 Capital 36,000 Sales R & A 24,000 Freight-Out 12,000 to close debit temporary accounts

8 E5-8 Natural Maltar Allied Cosmetics Grocery Wholesalers Sales $90,000 $100,000 $144,000 Sales Returns 16,000 6,000 12,000 Net Sales 74,000 94, ,000 Cost of Goods Sold 64,000 72, ,000 Gross Profit 10,000 22,000 24,000 Operating Expenses 6,000 12,000 18,000 Net Income $4,000 $10,000 $6,000 E5-9 a) Chevalier Company Income Statement for the year ended December 31, 2002 Sales Revenue: Net Sales $2,359,000 Cost of Goods Sold 989,000 Gross Profit 1,370,000 Operating Expenses: Selling Expenses $690,000 Administrative Expenses 435,000 Total Operating Expenses 1,125,000 Income From Operations 245,000 Other Revenues & Gains: Interest Revenue $45,000 Other Expenses & Losses: Interest Expense $70,000 Loss on Sale of Equipment 10,000 Total Non-Operating Expenses & Losses 80,000 Non-Operating Expenses 35,000 Net Income $210,000

9 b) Chevalier Company Income Statement for the year ended December 31, 2002 Revenues: Net Sales $2,359,000 Interest Revenue 45,000 Total Revenues 2,404,000 Expenses: Cost of Goods Sold $989,000 Selling Expenses 690,000 Administrative Expenses 435,000 Interest Expense 70,000 Loss On Sale Of Equipment 10,000 Total Expenses 2,194,000 Net Income $210,000 E5-10 a) JetForm Corporation Income Statement for the year ended April 30, 2000 (in 000s) Revenues: Sales $94,317 Investment Income 2,868 Gain on Sale of Assets 1,813 Other Income 295 Total Revenues 99,293 Expenses: Cost of Goods Sold $24,426 Sales & Marketing Expenses 45,097 General & Administrative Expenses 26,485 Amortization Expense 10,300 Income Tax Expense 1,086 Total Expenses 107,394 Net Loss $8,101

10 b) JetForm Corporation Income Statement for the year ended April 30, 2000 (in 000s) Sales Revenue: Sales $94,317 Cost of Goods Sold 24,426 Gross Profit 69,891 Operating Expenses: Sales & Marketing Expenses $45,097 General & Administrative Expenses* 36,785 Total Operating Expenses 81,882 Loss from Operations 11,991 Other Revenues & Gains: Investment Income $2,868 Other Income 295 Gain On Sale of Assets 1,813 Total Non-Operating Revenues $4,976 Other Expenses & Losses: Income Tax Expense 1,086 Non-Operating Revenues 3,890 Net Loss $8,101 *includes Amortization Expense c) Gross Profit Margin = Gross Profit Profit Margin = Net Income Net Sales Net Sales = 69,891 = ($8,101) 94,317 94,317 = 74.10% = (8.59%) Inventory Turnover = Cost of Good Sold Days Sales = Days in Year Average Inventory in Inv. Inv. Turnover = 24,426 = 365 days 1, times = times = 17 days

11 E c) Inventory Turnover = Cost of Good Sold = 1,298,606 = 1,546,723 Average Inventory (160, ,831)/2 (254, ,092)/2 = 1,298,606 = 1,546, , ,391 = 7.33 times = 7.46 times Days Sales in Inventory = Days in Year = 365 = 365 Inv. Turnover = 50 days = 49 days Gross Profit Margin = Gross Profit = 384,536 = 413,551 Net Sales 1,683,142 1,960,274 = 22.80% = 21.10% P5-1A a) April 5 Merchandise Inv. - Custom Sedans 72,000 A/P 72,000 bought 3 sedans on account (3 x $24000) 13 Merchandise Inv. - Recreational Vans 56,000 A/P 56,000 bought 2 vans on account (2 x $28000) 17 A/R 114,000 Sales 114,000 sold 4 sedans on account (4 x $28500) 17 Cost of Goods Sold 96,000 Merchandise Inv. - Custom Sedans 96,000 (4 x $24000) 20 Merchandise Inv. - Convertibles 52,000 A/P 52,000 bought 2 convertibles on account (2 x $26000) 22 A/P 26,000 Merchandise Inventory - Convertibles 26,000 returned 1 convertible for credit 24 A/R 102,000 Sales 102,000 sold 3 vans on account (3 x $34000) 24 Cost of Goods Sold 84,000 Merchandise Inv. - Recreational Vans 84,000 (3 x $28000)

12 April 28 A/R 31,000 Sales 31,000 sold 1 convertible on account 28 Cost of Goods Sold 26,000 Merchandise Inv. - Convertibles 26,000 P5-2A July 1 Merchandise Inventory 1,500 A/P 1,500 bought 50 suitcases on account (50 x $30) 3 A/R 2,000 Sales 2,000 sold 40 suitcases on account (40 x $50) 3 Cost of Goods Sold 1,200 Merchandise Inventory 1,200 9 A/P 1,500 Cash 1,500 paid on account 12 Cash 2,000 A/R 2,000 received cash on account 17 A/R 1,500 Sales 1,500 sold 30 suitcases on account (30 x $50) 17 Cost of Goods Sold 900 Merchandise Inventory 900 (30 x $30) 18 Merchandise Inventory 1,700 A/P 1,700 bought 60 suitcases on account 18 Merchandise Inventory 100 Cash 100 paid freight charges 20 A/P 300 Merchandise Inventory 300 returned 10 suitcases for credit 21 Cash 1,500 A/R 1,500 received cash on account

13 July 22 A/R 2,000 Sales 2,000 sold 40 suitcases on account 22 Cost of Goods Sold 1,200 Merchandise Inventory 1, A/P 1,400 Cash 1,400 paid on account 31 Sales Returns & Allowances 250 A/R 250 received 5 suitcases as a return 31 Merchandise Inventory 150 Cost of Goods Sold 150 to record cost of goods returned above P5-3A a) April 2 Merchandise Inventory 4,900 A/P - Kananaskis Supply Co. 4,900 purchased goods on account 4 A/R 5,000 Sales 5,000 sold goods on account 4 Cost of Goods Sold 4,000 Merchandise Inventory 4,000 5 Freight Out 200 Cash 200 paid shipping costs for goods sold 6 A/P - Kananaskis Supply Co. 300 Merchandise Inventory 300 returned goods for credit 14 Merchandise Inventory 4,400 Cash 4,400 purchased goods for cash 16 Cash 500 Merchandise Inventory 500 returned goods for refund

14 April 18 Merchandise Inventory 4,200 A/P - Pigeon Distributors 4,200 purchased goods on account 20 Merchandise Inventory 100 Cash 100 paid shipping on goods purchased 23 Cash 6,400 Sales 6,400 sold goods for cash 23 Cost of Goods Sold 5,200 Merchandise Inventory 5, Merchandise Inventory 2,300 Cash 2,300 purchased goods for cash 27 A/P - Kananaskis Supply Co. 4,600 Cash 4,600 paid on account 28 Cash 5,000 A/R 5,000 received cash on account 29 Sales R & A 90 Cash 90 refunded cash for returned goods 29 Merchandise Inventory 60 Cost of Goods Sold 60 to record return of above goods 30 A/R 3,700 Sales 3,700 sold goods on account 30 Cost of Goods Sold 3,000 Merchandise Inventory 3,000

15 c) Nisson Distributing Company Income Statement (partial) for the month ending April 30, 2003 Sales Revenue: Sales $15,100 Less: Sales Returns & Allowances 90 Net Sales 15,010 Cost of Goods Sold 12,140 Gross Profit $2,870 d) Nisson Distributing Company Balance Sheet (partial) for the month ending April 30, 2003 Current Assets: Cash $9,210 Accounts Receivable 3,700 Merchandise Inventory 2,960 Total Current Assets $15,870

16 P5-5A a) Daigle Department Store Income Statement for the year ended November 30, 2003 Sales Revenue: Sales $850,000 Less: Sales Returns & Allowances 10,000 Net Sales 840,000 Cost of Goods Sold 633,220 Gross Profit 206,780 Operating Expenses: Selling Expenses: Amortization Expense - Delivery Equipment $4,000 Delivery Expense 8,200 Insurance Expense 4,500 Salaries Expense 97,300 Sales Commissions Expense 12,750 Total Selling Expenses $126,750 Administrative Expenses: Amortization Expense - Building $9,500 Insurance Expense 4,500 Property Tax Expense 3,500 Salaries Expense 41,700 Utilities Expense 10,600 Total Administrative Expenses 69,800 Total Operating Expenses 196,550 Income from Operations 10,230 Other Revenues & Gains: Interest Revenue $5,000 Other Expenses & Losses: Interest Expense 8,000 Non-Operating Expenses 3,000 Net Income $7,230

17 b) Adjustments Nov. 30 Amortization Expense - Delivery Equipment 4,000 Accum. Amortization - Delivery Equipment 4,000 to adjust 30 Amortization Expense - Building 9,500 Accum. Amortization - Building 9,500 to adjust 30 Insurance Expense 9,000 Prepaid Insurance 9,000 to adjust 30 Property Tax Expense 3,500 Property Tax Payable 3,500 to adjust 30 Sales Commissions Expense 4,750 Sales Commissions Payable 4,750 to adjust c) Closing Nov. 30 Sales 850,000 Interest Revenue 5,000 B. Daigle, Capital 855,000 to close credit temporary accounts 30 B. Daigle, Capital 847,770 Cost of Goods Sold 633,220 Sales Returns & Allowances 10,000 Amortization Expense - Delivery Equipment 4,000 Delivery Expense 8,200 Insurance Expense 9,000 Salaries Expense 139,000 Sales Commissions Expense 12,750 Amortization Expense - Building 9,500 Property Tax Expense 3,500 Utilities Expense 10,600 Interest Expense 8,000 to close debit temporary accounts 30 B. Daigle, Capital 12,000 B. Daigle, Drawings 12,000 to close drawings