Question

Use the data for Frisco Company in Problem to complete the following requirements.
In Problem, Frisco Company’s adjusted trial balance on March 31, 2009, its fiscal year-end follows.
On March 31, 2008, merchandise inventory was $27,841. Supplementary records of merchandising activities for the year ended March 31, 2009, reveal the following itemized costs.
Invoice cost of merchandise purchases . . . . . . . . $101,430
Purchase discounts received . . . . . . . . . . . . . . . . . 2,130
Purchase returns and allowances . . . . . . . . . . . . . 4,868
Costs of transportation-in . . . . . . . . . . . . . . . . . . . 3,900
Required
1. Prepare closing entries as of March 31, 2009 (the perpetual inventory system is used).
Analysis Component
2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount. Does it appear that the company’s cash management system is accomplishing the goal of taking all available discounts? Explain.
3. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means approximately 5% of its gross sales were eventually returned outright or caused the company to grant allowances to customers. How do this year’s results compare to prior years’ results?


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  • CreatedMarch 18, 2015
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