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Accounting 23rd Edition Carl S. Warren - Solutions

=+5. Sold merchandise on account to Epworth Company, $30,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $19,500.
=+2. Sold merchandise for $20,000 plus 7% sales tax to retail cash customers. The cost of merchandise sold was $13,100.
=+PR 6-2A Single-step income statement and account form of balance sheet objs. 2, 4✔ 3. Total assets:$636,000 The following selected transactions were completed by Rayne Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:Aug. 1. Sold
=+4. Prepare closing entries as of November 30, 2010.
=+3. Prepare an account form of balance sheet, assuming that the current portion of the note payable is $8,000.
=+1. Prepare a single-step income statement in the format shown in Exhibit 3.
=+PR 6-1A Multiple-step income statement and report form of balance sheet obj. 2 Selected accounts and related amounts for Case-It Co. for the fiscal year ended November 30, 2010, are presented in Problem 6-1A.Instructions
=+(b) how report-form and account-form balance sheets differ.
=+4. Briefly explain (a) how multiple-step and single-step income statements differ and
=+3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000.
=+2. Prepare a statement of owner’s equity.
=+1. Prepare a multiple-step income statement.
=+Note Payable 54,000 Office Supplies Expense 1,650(final payment due 2025) Miscellaneous Administrative Gina Hennessy, Capital 454,800 Expense 1,900 Gina Hennessy, Drawing 45,000 Interest Expense 4,400 Sales 2,703,600 Instructions
=+Office Equipment 49,500 Miscellaneous Selling Expense 2,000 Store Equipment 311,500 Office Salaries Expense 73,800 Accumulated Depreciation— Rent Expense 39,900 Store Equipment 87,500 Insurance Expense 22,950 Accounts Payable 48,600 Depreciation Expense—Salaries Payable 3,600 Office Equipment
=+Problems Series A The following selected accounts and their current balances appear in the ledger of CaseIt Co. for the fiscal year ended November 30, 2010:Cash $ 37,700 Sales Returns and Allowances $ 37,800 Accounts Receivable 111,600 Sales Discounts 19,800 Merchandise Inventory 180,000 Cost of
=+b. Would you expect the ratio of net sales to assets for Kroger to be similar to or different from that of Tiffany & Co.? Tiffany is the large North American retailer of jewelry, with a ratio of net sales to average total assets of 0.94.Chapter 6 Accounting for Merchandising Businesses 299
=+a. Compute the ratio of net sales to assets for 2007. Round to two decimal places.
=+b. What conclusions can be drawn from these ratios concerning the trend in the ability of The Home Depot to effectively use its assets to generate sales?Kroger, a national supermarket chain, reported the following data (in millions) in its financial statements for 2007:Total revenue $66,111
=+a. Determine the ratio of net sales to average total assets for The Home Depot for 2007 and 2006. Round to two decimal places.
=+Net sales $90,837 $81,511 Total assets at the end of the year 52,263 44,482 Total assets at the beginning of the year 44,482 38,907
=+23. Received payment on account for the sale of February 13 less the discount.Journalize the entries to record the transactions of Artic Company.The Home Depot reported the following data (in millions) in its financial statements:2007 2006
=+15. Paid freight of $100 for the merchandise sold on February 13.17. Paid for the purchase of February 2 less the return and discount.
=+Ratio of net sales to total assets Feb. 13. Sold merchandise on account, $9,000, FOB destination, 2/10, n/30. The cost of merchandise sold was $6,600.
=+EX 6-37 Journal entries using perpetual inventory system Aladdin Company is a small rug retailer owned and operated by Lin Endsley. After the accounts have been adjusted on October 31, the following account balances were taken from the ledger:Advertising Expense . . . . . . . . . . . . . . . . .
=+Using the data shown in Exercise 6-38, journalize the entries for the transactions assuming that Artic Company uses the perpetual inventory system.Appendix 2
=+6. Returned $2,000 of the merchandise purchased on February 2.Journal entries using the periodic inventory system 298 Chapter 6 Accounting for Merchandising Businesses
=+5. Paid freight of $300 on the February 2 purchase.
=+EX 6-35 Rules of debit and credit for periodic inventory accounts The following selected transactions were completed by Artic Company during February of the current year. Artic Company uses the periodic inventory system.Feb. 2. Purchased $17,500 of merchandise on account, FOB shipping point,
=+Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit.Normal Account Increase Decrease Balance Purchases debit (a) (b)Purchases Discounts (c) debit credit Purchases Returns and Allowances credit (d) (e)Freight In (f) credit (g)
=+d. Determine the August 31 balance of Merchandise Inventory.(1) Cost of Merchandise Sold(2) Delivery Expense(3) Merchandise Inventory(4) Purchases(5) Purchases Discounts(6) Purchases Returns and Allowances(7) Sales(8) Sales Discounts(9) Sales Returns and Allowances(10) Freight In
=+c. Assume that you have posted the journal entries to the appropriate ledgers. Insert the correct posting references in the sales and purchases journals.
=+b. Record the purchases in a purchases journal. Use the purchases journal form shown in Appendix 1 at the end of this chapter.
=+a. Record the sales in a two-column sales journal. Use the sales journal form shown in Appendix 1 at the end of this chapter. Begin with Invoice No. 93.
=+The general ledger includes the following accounts:Account Number Account 11 Accounts Receivable 12 Merchandise Inventory 21 Accounts Payable 41 Sales 51 Cost of Merchandise Sold
=+During August, Crown Rug Company purchased the following rugs from Royal Importers:Date Quantity Rug Style Cost per Rug Amount Aug. 10 3 8 by 10 Indian $ 6,000 $18,000 12 1 10 by 8 Chinese 8,500 8,500 19 3 10 by 12 Persian 13,500 40,500
=+EX 6-34 Accounts for periodic and perpetual inventory systems The August 1 inventory was $44,500, consisting of:Quantity Style Cost per Rug Total Cost 3 10 by 8 Chinese $7,500 $22,500 4 8 by 12 Persian 5,500 22,000
=+a company using the periodic and perpetual systems, indicate (c) for both.
=+EX 6-33 Merchandising special journals✔d. $79,000 Chapter 6 Accounting for Merchandising Businesses 297 Indicate which of the following accounts would be included in the chart of accounts of a merchandising company using either the (a) periodic inventory system or (b) perpetual inventory
=+EX 6-32 Closing entries obj. 4 Crown Rug Company had the following credit sales transactions during August 2010:Date Customer Quantity Rug Style Sales Aug. 7 Wes McGill 1 10 by 8 Chinese $15,500 12 Joan Felt 1 8 by 12 Persian 11,000 23 Paula Larkin 1 8 by 10 Indian 11,500 30 Rajiv Kumar 1 10 by
=+Prepare the May 31, 2010, closing entries for Champion Interiors Company.
=+Cost of Merchandise Sold 188,000 Sales Returns and Allow. 12,000 Interest Expense 1,920 Sales Tax Payable 4,900 Jessica Duerr, Capital 141,155 Selling Expenses 124,000 Jessica Duerr, Drawing 7,950 Store Supplies 4,580 Merchandise Inventory 26,000 Store Supplies Expenses 2,465
=+On May 31, 2010, the balances of the accounts appearing in the ledger of Champion Interiors Company, a furniture wholesaler, are as follows:Accumulated Depr.—Building $ 30,460 Notes Payable $ 24,000 Administrative Expenses 65,300 Salaries Payable 680 Building 55,680 Sales 313,540 Cash 8,840
=+EX 6-29 Adjusting entry for merchandise inventory shrinkage obj. 4 From the following list, identify the accounts that should be closed to Income Summary at the end of the fiscal year under a perpetual inventory system: (a) Accounts Payable,(b) Advertising Expense, (c) Cost of Merchandise Sold,
=+EX 6-26 Sales-related transactions obj. 3 296 Chapter 6 Accounting for Merchandising Businesses Based on the data presented in Exercise 6-26, journalize Bitone Co.’s entries for (a) the purchase, (b) the return of the merchandise for credit, and (c) the payment of the invoice within the
=+receipt of the check for the amount due from Bitone Co.
=+EX 6-25 Sales tax transactions obj. 3 Summit Co., a furniture wholesaler, sells merchandise to Bitone Co. on account, $23,400, terms 2/10, n/30. The cost of the merchandise sold is $14,000. Summit Co. issues a credit memo for $4,400 for merchandise returned and subsequently receives the amount
=+EX 6-24 Sales tax obj. 3✔c. $14,850 Journalize the entries to record the following selected transactions:a. Sold $3,400 of merchandise on account, subject to a sales tax of 5%. The cost of the merchandise sold was $2,000.b. Paid $41,950 to the state sales tax department for taxes collected.
=+EX 6-23 Determining amounts to be paid on invoices obj. 3✔a. $14,200 A sale of merchandise on account for $13,750 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount of the sale? (c) What is the amount
=+a. $15,000 — FOB destination, n/30 $ 800b. 10,000 $400 FOB shipping point, 2/10, n/30 1,200c. 8,250 — FOB shipping point, 1/10, n/30 750d. 2,900 125 FOB shipping point, 2/10, n/30 400e. 3,850 — FOB destination, 2/10, n/30 —
=+EX 6-22 Purchase-related transactions obj. 3✔ (e) Cash, dr. $900 Determine the amount to be paid in full settlement of each of the following invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.Freight
=+e. Received a check for the balance owed from the return in (c), after deducting for the purchase in (d).
=+d. Purchased $4,000 of merchandise from Presidio Co. on account, terms n/30.
=+c. Discovered that $5,000 of the merchandise was defective and returned items, receiving credit.
=+b. Paid the amount owed on the invoice within the discount period.
=+a. Purchased $25,000 of merchandise from Presidio Co. on account, terms 2/10, n/30.
=+Journalize entries for the following related transactions of Westcoast Diagnostic Company:
=+EX 6-21 Purchase-related transactions obj. 3✔ (c) Cash, cr.$14,700
=+EX 6-19 Purchase-related transactions obj. 3 Chapter 6 Accounting for Merchandising Businesses 295 The debits and credits from four related transactions are presented in the following T accounts. Describe each transaction.Cash Accounts Payable(2) 250 (3) 500 (1) 8,000(4) 7,350 (4) 7,500
=+EX 6-18 Purchase-related transaction obj. 3 A retailer is considering the purchase of 100 units of a specific item from either of two suppliers. Their offers are as follows:A: $200 a unit, total of $20,000, 2/10, n/30, no charge for freight.B: $195 a unit, total of $19,500, 1/10, n/30, plus
=+. Under a perpetual inventory system, what account is credited by Newgen Company to record the return?
=+a. If Newgen Company pays the invoice within the discount period, what is the amount of cash required for the payment?
=+EX 6-17 Sales-related transactions obj. 3✔d. $12,775 Newgen Company purchased merchandise on account from a supplier for $9,000, terms 2/10, n/30. Newgen Company returned $1,200 of the merchandise and received full credit.
=+EX 6-16 Sales-related transactions obj. 3 Merchandise is sold on account to a customer for $12,500, terms FOB shipping point, 1/10, n/30. The seller paid the freight of $400. Determine the following: (a) amount of the sale, (b) amount debited to Accounts Receivable, (c) amount of the discount for
=+(5) 17,640 (1) 20,000 Accounts Receivable Sales Discounts(1) 20,000 (3) 2,000 (5) 360(5) 18,000 Merchandise Inventory Sales Returns and Allowances(4) 1,000 (2) 12,000 (3) 2,000 Cost of Merchandise Sold(2) 12,000 (4) 1,000
=+EX 6-14 Sales returns and allowances obj. 3 After the amount due on a sale of $25,000, terms 1/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment. The cost of the merchandise returned was $15,000. (a) What is the amount of
=+EX 6-13 Sales-related transactions, including the use of credit cards obj. 3 294 Chapter 6 Accounting for Merchandising Businesses During the year, sales returns and allowances totaled $65,900. The cost of the merchandise returned was $40,000. The accountant recorded all the returns and
=+e. Received an invoice from National Credit Co. for $5,600, representing a service fee paid for processing MasterCard, VISA, and American Express sales.
=+d. Sold merchandise to customers who used American Express, $45,000. The cost of the merchandise sold was $27,000.
=+c. Sold merchandise to customers who used MasterCard and VISA, $115,200. The cost of the merchandise sold was $70,000.
=+b. Sold merchandise on account, $12,000. The cost of the merchandise sold was $7,200.
=+a. Sold merchandise for cash, $18,500. The cost of the merchandise sold was $11,000.
=+Sales Sales Discounts Sales Returns and Allowances Sales Salaries Expense Store Equipment Store Supplies Store Supplies Expense Journalize the entries for the following transactions:
=+EX 6-12 Chart of accounts obj. 3 Miscellaneous Administrative Expense Miscellaneous Selling Expense Notes Payable Office Equipment Office Salaries Expense Office Supplies Office Supplies Expense Prepaid Insurance Rent Expense Salaries Payable
=+. Compare the major advantages and disadvantages of the multiple-step and singlestep forms of income statements.Frazee Paints Co. is a newly organized business with a list of accounts arranged in alphabetical order below.Accounts Payable Accounts Receivable Accumulated Depreciation—Office
=+. Prepare a multiple-step income statement for the year ended March 31, 2010.
=+EX 6-11 Multiple-step income statement obj. 2✔a. Net income:$275,000 Ricardo Cepeda, Capital $1,137,600 Ricardo Cepeda, Drawing 50,000 Salaries Payable 6,000 Sales 2,550,000 Sales Discounts 40,000 Sales Returns and Allowances 160,000 Selling Expenses 410,000 Store Supplies 15,400
=+On March 31, 2010, the balances of the accounts appearing in the ledger of El Dorado Furnishings Company, a furniture wholesaler, are as follows:Administrative Expenses $ 250,000 Building 1,025,000 Cash 97,000 Cost of Merchandise Sold 1,400,000 Interest Expense 15,000 Merchandise Inventory
=+EX 6-10 Determining amounts for items omitted from income statement obj. 2✔a. $15,000✔ h. $520,000
=+Two items are omitted in each of the following four lists of income statement data.Determine the amounts of the missing items, identifying them by letter.Sales $250,000 $600,000 $1,000,000 $ (g)Sales returns and allowances (a) 30,000 (e) 7,500 Sales discounts 10,000 18,000 40,000 11,500 Net sales
=+EX 6-9 Multiple-step income statement obj. 2 Chapter 6 Accounting for Merchandising Businesses 293 Construct a chart of accounts, assigning account numbers and arranging the accounts in balance sheet and income statement order, as illustrated in Exhibit 6. Each account number is three digits: the
=+Revenue from sales:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,345,800 Add: Sales returns and allowances . . . . . . . . . . . . . . . . $120,000 Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 180,000 _________ __________ Gross
=+EX 6-8 Single-step income statement obj. 2✔ Net income:$1,320,000 Identify the errors in the following income statement:Armortec Company Income Statement For the Year Ended February 28, 2010
=+EX 6-7 Income statement for merchandiser obj. 2 Summary operating data for Paper Plus Company during the current year ended June 30, 2010, are as follows: cost of merchandise sold, $4,000,000; administrative expenses,$500,000; interest expense, $30,000; rent revenue, $100,000; net sales,
=+1. Advertising expense 2. Depreciation expense on store equipment 3. Insurance expense on office equipment 4. Interest expense on notes payable 5. Rent expense on office building 6. Salaries of office personnel 7. Salary of sales manager 8. Sales supplies used
=+EX 6-6 Income statement for merchandiser obj. 2 The following expenses were incurred by a merchandising business during the year.In which expense section of the income statement should each be reported: (a) selling,(b) administrative, or (c) other?
=+b. What was the amount of gross profit?
=+a. What was the amount of net sales?
=+For the fiscal year, sales were $5,280,000, sales discounts were $100,000, sales returns and allowances were $75,000, and the cost of merchandise sold was $3,000,000.
=+EX 6-5 Cost of merchandise sold obj. 2✔ Correct cost of merchandise sold,$953,500
=+Identify the errors in the following schedule of cost of merchandise sold for the current year ended July 31, 2010:Cost of merchandise sold:Merchandise inventory, July 31, 2010 . . . . . . . . . . . . . . . $ 140,000 Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
=+EX 6-4 Cost of merchandise sold and related items obj. 2✔a. Cost of merchandise sold,$1,400,600 292 Chapter 6 Accounting for Merchandising Businesses
=+. Determine the gross profit to be reported on the income statement for the year ended November 30, 2010.
=+a. Prepare the cost of merchandise sold section of the income statement for the year ended November 30, 2010, using the periodic inventory system.
=+obj. 2 The following data were extracted from the accounting records of Wedgeforth Company for the year ended November 30, 2010:Merchandise inventory, December 1, 2009 $ 210,000 Merchandise inventory, November 30, 2010 185,000 Purchases 1,400,000 Purchases returns and allowances 20,000 Purchases
=+EX 6-3 Identify items missing in determining cost of merchandise sold
=+Determining cost of obj. 1 For (a) through (d), identify the items designated by “X” and “Y.”a. Purchases (X + Y) = Net purchases.b. Net purchases + X = Cost of merchandise purchased.c. Merchandise inventory (beginning) + Cost of merchandise purchased = X.d. Merchandise available for
=+EX 6-1 Determining gross In 2007, Best Buy reported revenue of $35,934 million. Its gross profit was $8,769 million. What was the amount of Best Buy’s cost of merchandise sold?
=+c. Will the income statement necessarily report a net income? Explain.
=+b. Compute the gross profit percentage (gross profit divided by sales).
=+a. What is the amount of the gross profit?

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