Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a beginning balance
Question:
Ranns Supply uses a perpetual inventory system. On January 1, its inventory account had a beginning balance of $6,450,000. Ranns engaged in the following transactions during the year:
1. Purchased merchandise inventory for $9,500,000.
2. Generated net sales of $26,000,000.
3. Recorded inventory shrinkage of $10,000 after taking a physical inventory at year-end.
4. Reported gross profit for the year of $15,000,000 in its income statement.
Requirements
a. At what amount was Cost of Goods Sold reported in the company’s year-end income statement?
b. At what amount was Merchandise Inventory reported in the company’s year-end balance sheet?
c. Immediately prior to recording inventory shrinkage at the end of the year, what was the balance of the Cost of Goods Sold account? What was the balance of the Merchandise Inventory?
Q2. Golf World sold merchandise to Mulligans for $10,000, offering terms of 1/15, n/30. Mulligans paid for the merchandise within the discount period. Both companies use perpetual inventory systems.
Requirements
a. Prepare journal entries in the accounting records of Golf World to account for this sale and the
subsequent collection. Assume the original cost of the merchandise to Golf World had been
$6,500.
b. Prepare journal entries in the accounting records of Mulligans to account for the purchase and
subsequent payment. Mulligans records purchases of merchandise at net cost.
c. Assume that, because of a change in personnel, Mulligans failed to pay for this merchandise
within the discount period. Prepare the journal entry in the accounting records of Mulligans to
record payment after the discount period.
Q3. Lamprino Appliance uses a perpetual inventory system. The following are three recent merchandising transactions:
- June 10 Purchased 10 televisions from Mitsu Industries on account. Invoice price, $300 per unit, for a total of $3,000. The terms of purchase were 2/10, n/30.
- June 15 Sold one of these televisions for $450 cash.
- June 20 Paid the account payable to Mitsu Industries within the discount period.
Requirements
a. Prepare journal entries to record these transactions assuming that Lamprino records purchases of merchandise at:
1. Net cost
2. Gross invoice price
b. Assume that Lamprino did not pay Mitsu Industries within the discount period but instead paid the full invoice price on July 10. Prepare journal entries to record this payment assuming that the original liability had been recorded at:
1. Net cost
2. Gross invoice price
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-1259692406
18th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello