On June 10, Rebecca Company purchased $8,950 of merchandise from Clinton Company, FOB shipping point, terms 4/10, n/30. Rebecca pays the freight costs of $420 on June 11. Damaged goods totaling $300 are returned to Clinton for credit on June 12. The fair value of these goods is $72. On June 19, Rebecca pays Clinton Company in full, less the purchase discount. Both companies use a perpetual inventory system.
(a) Prepare separate entries for each transaction on the books of Rebecca Company. (Record journal entries in the order in which they must have occurred. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Prepare separate entries for each transaction for Clinton Company. The merchandise purchased by Rebecca on June 10 had cost Clinton $4,960. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Presented below is information related to Taylor Co. for the month of January 2014.
Ending inventory per perpetual records $ 28,860
Insurance expense $ 12,530
Rent expense 20,290
Ending inventory actually on hand 28,010
Salaries and wages expense 57,020
Sales discounts 9,157
Cost of goods sold 226,820
Sales returns and allowances 15,140
Sales revenue 416,480
(a) Prepare the necessary adjusting entry for inventory. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Prepare the necessary closing entries.
Exercise 5-13 (Part Level Submission)
Presented below is financial information for two different companies.
*(a) Determine the missing amounts.
Lee Company Chan Company
Sales revenue $95,390
Sales returns $7,040
Net Sales 83,310 104,270
Cost of good sold 50,440
Gross profit 41,580
Operating expenses 16,520
Net income 16,970
*(b) Determine the gross profit rates.
Problem 5-2A (Part Level Submission)
Shmi Distributing Company completed the following merchandising transactions in the month of April. At the beginning of April, the ledger of Shmi showed Cash of $8,890 and Common Stock of $8,890.
Apr. 2 Purchased merchandise on account from Walker Supply Co. $6,600, terms 1/10, n/30.
4 Sold merchandise on account $6,600, FOB destination, terms 1/10, n/30. The cost of the merchandise sold was $2,750.
5 Paid $250 freight on April 4 sale.
6 Received credit from Walker Supply Co. for merchandise returned $600.
11 Paid Walker Supply Co. in full, less discount.
13 Received collections in full, less discounts, from customers billed on April 4.
14 Purchased merchandise for cash $4,100.
16 Received refund from supplier for returned goods on cash purchase of April 14, $560.
18 Purchased merchandise from Benjamin Distributors $5,100, FOB shipping point, terms 2/10, n/30.
20 Paid freight on April 18 purchase $100.
23 Sold merchandise for cash $7,440. The merchandise sold had a cost of $5,970.
Apr. 26 Purchased merchandise for cash $2,150.
27 Paid Benjamin Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise $85. The returned merchandise had a fair value of $34.
30 Sold merchandise on account $4,220, terms n/30. The cost of the merchandise sold was $2,090.
Shmi Distributing Company’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 201 Accounts Payable, No. 311 Common Stock, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold, and No. 644 Freight-Out.
(a) Journalize the transactions using a perpetual inventory system.
(b) Enter the beginning cash and capital balances, and post the transactions. (Use J1 for the journal reference.)
(c) Prepare the income statement through gross profit for the month of April 2014.
Problem 5-3A (Part Level Submission)
Starz Department Store is located near the Towne Shopping Mall. At the end of the company’s calendar year on December 31, 2014, the following accounts appeared in two of its trial balances.
Unadjusted Adjusted Unadjusted Adjusted
Accounts Payable $79,200 $119,647 Interest Revenue 5,960 5,960
Accounts Receivable 74,947 74,947 Inventory 111,750 111,750
Accumulated Depr-Bldgs 62,729 78,225 Mortgage Payable 119,200 119,200
Accumulated Depr-Equip 44,104 63,921 Prepaid Insurance 14,304 3,576
Buildings 432,100 432,100 Property Tax Expense 7,152
Cash 35,462 35,462 Property Tax Payable 7,152
Common Stock 166,880 166,880 Retained Earnings 96,254 96,254
Cost of Goods Sold 614,923 614,923 Salaries and Wages 160,920 160,920
Depreciation Expense 35,313 Sales Revenue 1,078,760 1,078,760
Dividends 35,760 35,760 Sales Commissions Expense 15,198 21,605
Equipment 163,900 163,900 Sales Commissions’ Payable 6,407
Insurance Expense 10,728 Sales Returns and Allowances 11,920 11,920
Interest Expense 4,470 12,814 Utilities Expense 16,390 17,880
Interest Payable 8,344
(a) Prepare a multiple-step income statement. (List other revenues before other expenses.)
(b) Prepare retained earnings statement. (List items that will increase retained earnings first.)
(c) Prepare a classified balance sheet. $16,000 of the mortgage payable is due for payment next year. (List current assets in order of liquidity. Property, plant and equipment list in order of land, buildings and equipment.)
(d) Journalize the adjusting entries that were made. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that further discussions with Alou’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $327,370. Discussions with the accountant reveal the following.
1. Alou sold goods costing $43,150 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2. The physical count of the inventory did not include goods costing $95,050 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end.
3. Alou received goods costing $26,070 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count.
4. Alou sold goods costing $47,530 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou’s physical inventory.
5. Alou received goods costing $49,690 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $327,370.
Determine the correct inventory amount on December 31.
Fenton Company applied FIFO to its inventory and got the following results for its ending inventory.
Cameras 109 units at a cost per unit of $61
DVD players 158 units at a cost per unit of $81
iPods 142 units at a cost per unit of $87
The cost of purchasing units at year-end was cameras $83, DVD players $51, and iPods $71.
Determine the amount of ending inventory at lower-of-cost-or-market.
The cost of goods sold computations for Silver Company and Gold Company are shown below.
Silver Company Gold Company
Beginning inventory $ 46,990 $ 72,520
Cost of goods purchased 196,070 297,480
Cost of goods available for sale 243,060 370,000
Ending inventory 58,950 72,910
Cost of goods sold $184,110 $297,090
a) Compute inventory turnover for each company. (Round answers to 2 decimal places, e.g. 1.25.)
b) Compute days in inventory for each company. (Round inventory turnover values to 2 decimal places, e.g. 1.25 and final answers to 0 decimal places, e.g. 125.)
Milo Company had a beginning inventory of 1,048 units of Product Kimbo at a cost of $3 per unit. During the year, purchases were:
Feb. 20 786 @ $9 Aug. 12 1,572 @ $12
May 5 1,310 @ $10 Dec. 8 524 @ $13
Milo Company uses a periodic inventory system. Sales totaled 3,930 units.
a) Determine the cost of goods available for sale.
b) Calculate the weighted-average unit cost. (Round answer to 2 decimal places, e.g. $2.25.)
c) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. $2,120.)
d) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and (2) the lowest cost of goods sold for the income statement?