5
Accounting CHAPTER for Merchandising Operations
ANSWERS TO QUESTIONS
1.
(a) Disagree. The steps in the accounting cycle are the same for both a merchandiser and a
service enterprise.
(b) The measurement of income is conceptually the same. In both types of companies, net income
(or loss) results from the matching of expenses with revenues.
2.
The normal operating cycle for a merchandiser is likely to be longer than in a service company
because inventory must first be purchased and sold, and then the receivables must be collected.
3.
(a) The components of revenues and expenses differ as follows:
Revenues
Expenses
Merchandiser
Sales
Cost of Goods Sold and Operating
Service
Fees, Rents, etc.
Operating (only)
(b) The income measurement process is as follows:
Sales
Revenues
Less
Cost of
Goods
Sold
Equals
Gross
Profit
Less
Operating
Expenses
Equals
Net
Income
4.
Income measurement for a merchandiser differs from a service company as follows: (a) sales are
the primary source of revenue and (b) expenses are divided into two main categories: cost of goods
sold and operating expenses.
5.
In a perpetual inventory system, cost of goods sold is determined each time a sale occurs.
6.
The letters FOB mean Free on Board. FOB shipping point means that goods are placed free on
board the carrier by the seller. The buyer then pays the freight and debits Merchandise Inventory.
FOB destination means that the goods are placed free on board at the buyers place of business.
Thus, the seller pays the freight and debits Freight-out.
7.
Credit terms of 2/10, n/30 mean that a 2% cash discount may be taken if payment is made within
10 days of the invoice date; otherwise, the invoice price is due 30 days from the invoice date.
8.
July 24
9.
Accounts Payable ($2,000 $200) ...............................................
Merchandise Inventory ($1,800 X 2%) ..................................
Cash ($1,800 $36) .............................................................
1,800
36
1,764
Agree. In accordance with the revenue recognition principle, sales revenues are generally considered to be earned when the goods are transferred from the seller to the buyer; that is, when the
exchange transaction occurs. The earning of revenue is not dependent on the collection of credit
sales.
5-1
10.
(a) The primary source documents are: (1) cash salescash register tapes, (2) credit sales
sales invoice, and (3) sales returns and allowancescredit memoranda.
(b) The entries are:
Debit
Cash sales
Credit sales
Sales returns and
allowances
11.
July 19
Cash..............................................................
Sales .....................................................
Cost of Goods Sold .......................................
Merchandise Inventory...........................
XX
Accounts Receivable .....................................
Sales .....................................................
Cost of Goods Sold .......................................
Merchandise Inventory...........................
XX
Sales Returns and Allowances ......................
Accounts Receivable .............................
Merchandise Inventory ..................................
Cost of Goods Sold
Credit
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Cash ($800 $16) ............................................................................
Sales Discounts ($800 X 2%) ...........................................................
Accounts Receivable ($900 $100)..........................................
784
16
800
12.
The perpetual inventory records of merchandise inventory may be incorrect due to a variety of
causes such as recording errors, theft, or waste.
13.
Two closing entries are required:
(1) Sales .............................................................................................
Income Summary ...................................................................
200,000
(2) Income Summary...........................................................................
Cost of Goods Sold ................................................................
130,000
200,000
130,000
14.
Of the merchandising accounts, only Merchandise Inventory will appear in the post-closing trial
balance.
15.
Sales revenues......................................................................................................
Cost of goods sold.................................................................................................
Gross profit............................................................................................................
$115,000
70,000
$ 45,000
16.
Gross profit............................................................................................................
Less: Net income..................................................................................................
Operating expenses ..............................................................................................
$570,000
200,000
$370,000
17.
There are three distinguishing features in the income statement of a merchandiser: (1) a sales
revenues section, (2) a cost of goods sold section, and (3) gross profit.
18.
(a) The operating activities part of the income statement has three sections: sales revenues, cost
of goods sold, and operating expenses.
5-2
(b) The nonoperating activities part consists of two sections: other revenues and gains, and other
expenses and losses.
*19.
The functional groupings are selling and administrative. The problem with functional groupings is
that some expenses may have to be allocated between the functions.
*20.
The single-step income statement differs from the multiple-step income statement in that: (1) all
data are classified into two categories: revenues and expenses, and (2) only one step, subtracting
total expenses from total revenues, is required in determining net income (or net loss).
*21.
The columns are:
(a) Merchandise InventoryTrial Balance (Dr.), Adjusted Trial Balance (Dr.), and Balance Sheet
(Dr.).
(b) Cost of Goods SoldTrial Balance (Dr.), Adjusted Trial Balance (Dr.), and Income Statement
(Dr.).
5-3
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 5-1
(a)
Cost of goods sold = $43,500 ($75,000 $31,500).
Operating expenses = $20,700 ($31,500 $10,800).
(b)
Gross profit = $38,000 ($108,000 $70,000).
Operating expenses = $8,500 ($38,000 $29,500).
(c)
Sales = $171,500 ($71,900 + $99,600).
Net income = $60,100 ($99,600 $39,500).
BRIEF EXERCISE 5-2
Keo Company
Merchandise Inventory....................................................................
Accounts Payable ...................................................................
Cesar Company
Accounts Receivable.......................................................................
Sales ........................................................................................
Cost of Goods Sold .........................................................................
Merchandise Inventory...........................................................
800
800
800
800
560
560
BRIEF EXERCISE 5-3
(a)
(b)
Accounts Receivable.......................................................
Sales ........................................................................
Cost of Goods Sold .........................................................
Merchandise Inventory...........................................
Sales Returns and Allowances.......................................
Accounts Receivable..............................................
Merchandise Inventory....................................................
Cost of Goods Sold ................................................
5-4
800,000
800,000
580,000
580,000
120,000
120,000
90,000
90,000
BRIEF EXERCISE 5-3 (Continued)
(c)
Cash ($680,000 $13,600)...............................................
Sales Discounts ($680,000 X 2%) ...................................
Accounts Receivable..............................................
($800,000 $120,000)
666,400
13,600
680,000
BRIEF EXERCISE 5-4
(a)
(b)
(c)
Merchandise Inventory....................................................
Accounts Payable ...................................................
800,000
Accounts Payable ............................................................
Merchandise Inventory...........................................
120,000
Accounts Payable ($800,000 $120,000).......................
Merchandise Inventory...........................................
($680,000 X 2%)
Cash ($680,000 $13,600)......................................
680,000
800,000
120,000
13,600
666,400
BRIEF EXERCISE 5-5
RAFEUL HUDA COMPANY
Income Statement (Partial)
For the Month Ended October 31, 2002
Sales revenues
Sales ($280,000 + $100,000) ...........................................
Less: Sales returns and allowances ............................
Sales discounts .................................................
Net sales ..........................................................................
$380,000
$20,000
11,000
31,000
$349,000
BRIEF EXERCISE 5-6
Cost of Goods Sold ..................................................................................
Merchandise Inventory....................................................................
5-5
900
900
BRIEF EXERCISE 5-7
Sales ..........................................................................................
Income Summary .............................................................
180,000
Income Summary......................................................................
Cost of Goods Sold .........................................................
Sales Discounts ...............................................................
107,000
180,000
105,000
2,000
BRIEF EXERCISE 5-8
As the names suggest, numerous steps are required in determining net income in a multiple-step income statement. In contrast, only one step is required to compute net income
in a single-step income statement. A multiple-step statement has five sections whereas
a single-step statement has only two sections. The multiple-step statement provides more
detail than a single-step statement, but net income is the same under both statements.
Some of the differences in presentation can be seen from the comparative
information presented below.
(1)
Multiple-Step Income Statement
Item
a.
b.
c.
(2)
Section
Other revenues and gains
Other expenses and losses
Cost of goods sold
Gain on sale of equipment
Casualty loss from vandalism
Cost of goods sold
Single-Step Income Statement
Item
a.
b.
c.
Section
Gain on sale of equipment
Casualty loss from vandalism
Cost of goods sold
Revenues
Expenses
Expenses
BRIEF EXERCISE 5-9
(a)
Net sales = $500,000 $15,000 = $485,000.
5-6
BRIEF EXERCISE 5-9 (Continued)
(b)
Gross profit = $485,000 $350,000 = $135,000.
(c)
Income from operations = $135,000 $70,000 $40,000 = $25,000.
*BRIEF EXERCISE 5-10
(a)
Cash: Trial balance debit column; Adjusted trial balance debit column; Balance
sheet debit column.
(b)
Merchandise inventory: Trial balance debit column; Adjusted trial balance column;
Balance sheet debit column.
(c)
Sales: Trial balance credit column; Adjusted trial balance credit column, Income
statement credit column.
(d)
Cost of goods sold: Trial balance debit column, Adjusted trial balance debit column,
Income statement debit column.
5-7
SOLUTIONS TO EXERCISES
EXERCISE 5-1
(a)
(1)
April
Merchandise Inventory..............................
Accounts Payable .............................
17,000
Merchandise Inventory..............................
Cash ...................................................
900
Equipment ..................................................
Accounts Payable .............................
26,000
Accounts Payable......................................
Merchandise Inventory.....................
3,000
Accounts Payable......................................
($17,000 $3,000)
Merchandise Inventory.....................
[($17,000 $3,000) X 2%]
Cash ($14,000 $280).......................
14,000
May 4Accounts Payable ($17,000 $3,000).........................
Cash .............................................................
14,000
(2)
April
(3)
April
(4)
April
(5)
(b)
5
6
7
8
April 15
17,000
900
26,000
3,000
280
13,720
14,000
EXERCISE 5-2
Sept.
6
9
10
12
Merchandise Inventory (80 X $19) .............................
Cash ....................................................................
1,520
Merchandise Inventory ...............................................
Cash ....................................................................
80
Accounts Receivable (2 X $20) ..................................
Merchandise Inventory ......................................
40
Accounts Receivable (26 X $31) ................................
Sales....................................................................
Cost of Goods Sold (26 X $20)...................................
Merchandise Inventory ......................................
806
5-8
1,520
80
40
806
520
520
EXERCISE 5-2 (Continued)
Sept. 14
20
Sales Returns and Allowances ........................................
Accounts Receivable ...............................................
Merchandise Inventory .....................................................
Cost of Goods Sold..................................................
31
Accounts Receivable (30 X $31) ......................................
Sales..........................................................................
Cost of Goods Sold (30 X $20).........................................
Merchandise Inventory ............................................
930
31
20
20
930
600
600
EXERCISE 5-3
(a)
June 10Merchandise Inventory.....................................................
Accounts Payable............................................
11
6,000
Merchandise Inventory ............................................
Cash..................................................................
300
Accounts Payable ....................................................
Merchandise Inventory ...................................
400
Accounts Payable ($6,000 $400) ..........................
Merchandise Inventory ...................................
($5,600 X 2%)
Cash ($5,600 $112) .......................................
5,600
June 10Accounts Receivable .......................................................
Sales .................................................................
Cost of Goods Sold..................................................
Merchandise Inventory ...................................
6,000
12
19
(b)
6,000
12
Sales Returns and Allowances ...............................
Accounts Receivable ......................................
Merchandise Inventory ............................................
Cost of Goods Sold .........................................
*$400 X ($3,000 $6,000)
5-9
300
400
112
5,488
6,000
3,000
3,000
400
400
200*
200
EXERCISE 5-3 (Continued)
June 19
Cash ($5,600 $112) ................................................
Sales Discounts ($5,600 X 2%)................................
Accounts Receivable ......................................
($6,000 $400)
5,488
112
5,600
EXERCISE 5-4
(a)
(1)
(2)
(3)
(b)
Dec.
Dec.
3
8
Dec. 13
Accounts Receivable.............................
Sales ..............................................
Cost of Goods Sold ...............................
Merchandise Inventory.................
480,000
Sales Returns and Allowances.............
Accounts Receivable....................
25,000
Cash ($455,000 $9,100).......................
Sales Discounts .....................................
[($480,000 $25,000) X 2%]
Accounts Receivable....................
($480,000 $25,000)
445,900
9,100
480,000
320,000
320,000
25,000
455,000
Cash ........................................................................ 455,000
Accounts Receivable.................................................
($480,000 $25,000)
455,000
EXERCISE 5-5
(a)
DIMITRY COMPANY
Income Statement (Partial)
For the Year Ended October 31, 2002
Sales revenues
Sales .......................................................................
Less: Sales returns and allowances ...................
Sales discounts ........................................
Net sales .................................................................
Note: Freight-out is a selling expense.
5-10
$800,000
$25,000
15,000
40,000
$760,000
EXERCISE 5-5 (Continued)
(b)
(1)
Oct. 31
Sales .......................................................
Income Summary..........................
800,000
Income Summary...................................
Sales Returns and
Allowances ................................
Sales Discounts ............................
40,000
Cost of Goods Sold ............................................................
Merchandise Inventory..............................................
400
Sales ....................................................................................
Income Summary .......................................................
350,000
Income Summary ................................................................
Cost of goods sold ($208,000 + $400) ......................
Freight-out..................................................................
Insurance expense.....................................................
Rent expense .............................................................
Salary expense...........................................................
Sales discounts..........................................................
Sales returns and allowances...................................
329,400
Income Summary ($350,000 $329,400)...........................
Croce, Capital.............................................................
20,600
(2)
31
800,000
25,000
15,000
EXERCISE 5-6
(a)
(b)
5-11
400
350,000
208,400
7,000
12,000
20,000
61,000
8,000
13,000
20,600
EXERCISE 5-7
(a)
BERMAN COMPANY
Income Statement
For the Year Ended December 31, 2002
Net sales .......................................................
Cost of goods sold ........................................
Gross profit ....................................................
Operating expenses
Selling expenses...................................
Administrative expenses......................
Total operating expenses............
Income from operations ................................
Other revenues and gains
Interest revenue ....................................
Other expenses and losses
Interest expense....................................
Loss on sale of equipment...................
Net income .....................................................
(b)
$2,350,000
1,289,000
1,061,000
$490,000
435,000
925,000
136,000
45,000
$70,000
10,000
80,000
35,000
$ 101,000
BERMAN COMPANY
Income Statement
For the Year Ended December 31, 2002
Revenues
Net sales .........................................................
Interest revenue .............................................
Total revenues.......................................
Expenses
Cost of goods sold ........................................
Selling expenses............................................
Administrative expenses...............................
Interest expense.............................................
Loss on sale of equipment............................
Total expenses ......................................
Net income ..............................................................
5-12
$2,350,000
45,000
2,395,000
$1,289,000
490,000
435,000
70,000
10,000
2,294,000
$ 101,000
EXERCISE 5-8
1.
2.
3.
4.
Sales Returns and Allowances.......................................................
Sales ........................................................................................
175
Supplies............................................................................................
Cash ............................................................................................200
Accounts Payable ...................................................................
Merchandise Inventory...........................................................
200
Sales Discounts ...............................................................................
Sales ........................................................................................
80
Merchandise Inventory....................................................................
Cash ............................................................................................270
Freight-out...............................................................................
30
175
200
200
80
300
EXERCISE 5-9
(*missing amount)
a.
Sales ......................................................................................................
*Sales returns .........................................................................................
Net sales ................................................................................................
$ 90,000)
(7,000)
$ 83,000)
b.
Net sales ................................................................................................
Cost of goods sold ...............................................................................
*Gross profit ...........................................................................................
$ 83,000)
(56,000)
$ 27,000)
c.
Gross profit ...........................................................................................
Operating expenses .............................................................................
*Net income.............................................................................................
$ 27,000)
(15,000)
$ 12,000)
d.
*Sales ......................................................................................................
Sales returns .........................................................................................
Net sales ................................................................................................
$100,000)
(5,000)
$ 95,000)
e.
Net sales ................................................................................................
*Cost of goods sold ...............................................................................
Gross profit ...........................................................................................
$ 95,000)
57,000)
$ 38,000)
5-13
EXERCISE 5-9 (Continued)
f.
Gross profit ...........................................................................................
*Operating expenses..............................................................................
Net income ............................................................................................
$ 38,000)
23,000)
$ 15,000)
*EXERCISE 5-10
Accounts
Adjusted
Trial Balance
Debit
Cash
Merchandise Inventory
Sales
Sales Returns and Allowances
Sales Discounts
Cost of Goods Sold
Credit
Income
Statement
Debit
Credit
9,000
80,000
Balance
Sheet
Debit
9,000
80,000
450,000
10,000
7,000
250,000
450,000
10,000
7,000
250,000
5-14
Credit
SOLUTIONS TO PROBLEMS
PROBLEM 5-1A
(a)
July
1
9
12
17
1,500
Accounts Receivable (40 X $50)...............................
Sales ..................................................................
2,000
Cost of Goods Sold (40 X $30) .................................
Merchandise Inventory.....................................
3
Merchandise Inventory (50 X $30)............................
Accounts Payable.............................................
1,200
Accounts Payable......................................................
Merchandise Inventory.....................................
($1,500 X .01)
Cash...................................................................
1,500
Cash...................................................................1,980
Sales Discounts.........................................................
Accounts Receivable........................................
1,500
2,000
1,200
15
1,485
20
2,000
21
900
Merchandise Inventory..............................................
Accounts Payable.............................................
1,700
Merchandise Inventory..............................................
Cash...................................................................
20
1,500
Cost of Goods Sold (30 X $30) .................................
Merchandise Inventory.....................................
18
Accounts Receivable (30 X $50)...............................
Sales ..................................................................
100
Accounts Payable (10 X $30) ....................................
Merchandise Inventory.....................................
300
Cash...................................................................1,485
Sales Discounts.........................................................
Accounts Receivable........................................
5-15
1,500
900
1,700
100
300
15
1,500
PROBLEM 5-1A (Continued)
July 22
31
2,000
Cost of Goods Sold (40 X $30) .................................
Merchandise Inventory.....................................
30
Accounts Receivable (40 X $50)...............................
Sales ..................................................................
1,200
Accounts Payable ($1,700 $300) ...........................
Cash...................................................................
1,400
Sales Returns and Allowances (5 X $50) .................
Accounts Receivable........................................
250
Merchandise Inventory (5 X $30)..............................
Cost of Goods Sold ..........................................
150
5-16
2,000
1,200
1,400
250
150
PROBLEM 5-2A
(a)
General Journal
J1
Date
Apr.
2
4
5
6
11
13
14
16
Account Titles and Explanation
Merchandise Inventory
Accounts Payable
Ref.
120
201
Debit
5,900
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
5,200
Freight-out
Cash
644
101
200
Accounts Payable
Merchandise Inventory
201
120
300
Accounts Payable ($5,900 $300)
Merchandise Inventory
($5,600 X 2%)
Cash
201
120
5,600
Cash
Sales Discounts ($5,200 X 2%)
Accounts Receivable
101
414
112
5,096
104
Merchandise Inventory
Cash
120
101
4,400
Cash
101
120
500
Merchandise Inventory
Accounts Payable
120
201
4,200
Merchandise Inventory
Cash
120
101
100
Merchandise Inventory
18
20
5-17
Credit
5,900
5,200
4,100
4,100
200
300
112
101
5,488
5,200
4,400
500
4,200
100
PROBLEM 5-2A (Continued)
General Journal
J1
Date
Apr. 23
26
27
29
30
Account Titles and Explanation
Cash
Sales
Cost of Goods Sold
Merchandise Inventory
Ref.
101
401
505
120
Debit
6,400
Merchandise Inventory
Cash
120
101
2,300
Accounts Payable
Merchandise Inventory
($4,200 X 2%)
Cash
201
120
4,200
Sales Returns and Allowances
Cash
Merchandise Inventory
Cost of Goods Sold
412
101
120
505
90
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
3,700
6,400
5,120
5,120
2,300
84
101
5-18
Credit
4,116
90
30
30
3,700
3,000
3,000
PROBLEM 5-2A (Continued)
(b)
Cash
No. 101
Date
Apr.
Explanation
1
5
11
13
14
16
20
23
26
27
29
Balance
Ref.
T
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
Debit
Credit
200
5,488
5,096
4,400
500
100
6,400
2,300
4,116
90
Accounts Receivable
Date
Apr.
Explanation
Ref.
Debit
Credit
Balance
5,200
5,200
5,200
0
3,700
3,700
Merchandise Inventory
Date
Apr.
Explanation
2
4
6
11
14
16
18
20
23
26
27
29
30
9,000
8,800
3,312
8,408
4,008
4,508
4,408
10,808
8,508
4,392
4,302
No. 112
J1
J1
J1
4
13
30
Balance
No. 120
Ref.
Debit
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
5,900
5-19
Credit
4,100
300
112
4,400
500
4,200
100
5,120
2,300
84
30
3,000
Balance
5,900
1,800
1,500
1,388
5,788
5,288
9,488
9,588
4,468
6,768
6,684
6,714
3,714
PROBLEM 5-2A (Continued)
Accounts Payable
Date
Apr.
Explanation
2
6
11
18
27
No. 201
Ref.
J1
J1
J1
J1
J1
Debit
Credit
Balance
5,900
5,900
5,600
0
4,200
0
300
5,600
4,200
4,200
M. Hubbs, Capital
Date
Apr.
Explanation
1
Balance
No. 301
Ref.
Debit
Credit
T
9,000
Sales
No. 401
Date
Apr.
Explanation
4
23
30
Ref.
Debit
Balance
5,200
6,400
3,700
J1
J1
J1
Credit
5,200
11,600
15,300
Sales Returns and Allowances
Date
Explanation
Apr. 29
No. 412
Ref.
J1
Debit
Credit
90
Date
Explanation
Apr. 13
No. 414
Ref.
J1
Debit
Credit
104
Explanation
4
23
29
30
Balance
104
Cost of Goods Sold
Date
Balance
90
Sales Discounts
Apr.
Balance
No. 505
Ref.
Debit
J1
J1
J1
J1
4,100
5,120
5-20
Credit
30
3,000
Balance
4,100
9,220
9,190
12,190
PROBLEM 5-2A (Continued)
Freight-out
Date
Apr.
(c)
No. 644
Explanation
5
Ref.
Debit
J1
Credit
200
Balance
200
HUBBS DISTRIBUTING COMPANY
Income Statement (Partial)
For the Month Ended April 30, 2002
Sales revenues
Sales ................................................................................
Less: Sales returns and allowances ............................
Sales discounts .................................................
Net sales ..........................................................................
Cost of goods sold ..................................................................
Gross profit ..............................................................................
5-21
$15,300
$ 90
104
194
15,106
12,190
$ 2,916
PROBLEM 5-3A
(a)
GITLER DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2002
Sales revenues
Sales ..............................................................
Less: Sales returns and
allowances....................................
Net sales .......................................................
Cost of goods sold ...............................................
Gross profit .......................................................
Operating expenses
Selling expenses
Sales salaries expense.........................
Sales commissions expense ...............
Depr. expenseequipment .................
Utilities expense
($11,000 X 60%).................................
Insurance expense
($7,200 X 60%)...................................
Total selling expenses .................
Administrative expenses
Office salaries expense........................
Depr. expensebuilding......................
Property tax expense ...........................
Utilities expense
($11,000 X 40%).................................
Insurance expense
($7,200 X 40%)...................................
Total administrative
expenses ...................................
Total operating
expenses........................
Income from operations .......................................
Other revenues and gains
Interest revenue ............................................
Other expenses and losses
Interest expense ...........................................
Net income ............................................................
5-22
$628,000
8,000
620,000
412,700
207,300
$76,000
15,500
13,300
6,600
4,320
$115,720
32,000
10,400
4,800
4,400
2,880
54,480
170,200
37,100
4,000
11,000
7,000
$ 30,100
PROBLEM 5-3A (Continued)
GITLER DEPARTMENT STORE
Owners Equity Statement
For the Year Ended December 31, 2002
L. Gitler, Capital, January 1.............................................................................
Add: Net income ............................................................................................
Less: Drawings ...............................................................................................
L. Gitler, Capital, December 31 .......................................................................
$176,600
30,100
206,700
28,000
$178,700
GITLER DEPARTMENT STORE
Balance Sheet
December 31, 2002
Assets
Current assets
Cash ..............................................................
Accounts receivable ....................................
Merchandise inventory................................
Prepaid insurance........................................
Total current assets............................
Property, plant, and equipment
Building ........................................................
Less: Accumulated depreciation
building........................................
Equipment ....................................................
Less: Accumulated depreciation
equipment ...................................
Total assets .........................................
5-23
$ 23,000
50,300
75,000
2,400
150,700
$190,000
52,500
110,000
$137,500
42,900
67,100
204,600
$355,300
PROBLEM 5-3A (Continued)
GITLER DEPARTMENT STORE
Balance Sheet (Continued)
December 31, 2002
Liabilities and Owners Equity
Current liabilities
Accounts payable ...................................................................................
Mortgage payable due next year ...........................................................
Property taxes payable...........................................................................
Sales commissions payable ..................................................................
Interest payable ......................................................................................
Total current liabilities...................................................................
Long-term liabilities
Mortgage payable ...................................................................................
Total liabilities ................................................................................
Owners equity
L. Gitler, Capital ......................................................................................
Total liabilities and owners equity...............................................
(b)
Dec. 31
31
31
31
31
31
Depreciation ExpenseBuilding .......................
Accumulated Depreciation
Building ...................................................
7,200
Interest Expense..................................................
Interest Payable ..........................................
8,000
Property Taxes Expense .....................................
Property Taxes Payable .............................
4,800
Sales Commissions Expense .............................
Sales Commissions .....................
178,700
$355,300
13,300
Insurance Payable Expense ..............................................
Prepaid Insurance.......................................
60,000
176,600
10,400
Depreciation ExpenseEquipment ...................
Accumulated Depreciation
Equipment ...............................................
$ 79,300
20,000
4,800
4,500
8,000
116,600
4,500
5-24
10,400
13,300
7,200
8,000
4,800
4,500
PROBLEM 5-3A (Continued)
(c)
Dec. 31
31
31
31
Sales ..................................................................
Interest Revenue...............................................
Income Summary.....................................
628,000
4,000
Income Summary..............................................
Sales Returns and Allowances...............
Cost of Goods Sold .................................
Office Salaries Expense ..........................
Sales Salaries Expense...........................
Sales Commissions Expense .................
Property Taxes Expense .........................
Utilities Expense ......................................
Depreciation Expense
Building ................................................
Depreciation Expense
Equipment ............................................
Insurance Expense ..................................
Interest Expense ......................................
601,900
Income Summary..............................................
L. Gitler, Capital .......................................
30,100
L. Gitler, Capital ................................................
L. Gitler, Drawing .....................................
28,000
5-25
632,000
8,000
412,700
32,000
76,000
15,500
4,800
11,000
10,400
13,300
7,200
11,000
30,100
28,000
PROBLEM 5-4A
(a)
General Journal
J1
Date
Apr.
4
6
8
10
11
13
14
15
Account Titles and Explanation
Merchandise Inventory
Accounts Payable
Ref.
120
201
Debit
640
Merchandise Inventory
Cash
120
101
40
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
1,150
Accounts Payable
Merchandise Inventory
201
120
40
Merchandise Inventory
Cash
120
101
300
Accounts Payable ($640 $40)
Merchandise Inventory
($600 X 3%)
Cash
201
120
600
Merchandise Inventory
Accounts Payable
120
201
700
Cash
101
120
50
Merchandise Inventory
Cash
120
101
30
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
800
Merchandise Inventory
17
18
5-26
Credit
640
40
1,150
750
750
40
300
18
101
582
700
50
30
800
530
530
PROBLEM 5-4A (Continued)
General Journal
J1
Date
Apr. 20
21
27
30
Account Titles and Explanation
Cash
Accounts Receivable
Ref.
101
112
Debit
500
Accounts Payable
Merchandise Inventory
($700 X 2%)
Cash
201
120
700
Sales Returns and Allowances
Accounts Receivable
412
112
30
Cash
101
112
675
500
14
101
Accounts Receivable
Credit
686
30
675
(b)
Cash
No. 101
Date
Apr.
Explanation
1
6
11
13
15
17
20
21
30
Balance
Ref.
T
J1
J1
J1
J1
J1
J1
J1
J1
Debit
Credit
40
300
582
50
30
500
686
675
Accounts Receivable
Date
Apr.
Explanation
8
18
20
27
30
Balance
2,500
2,460
2,160
1,578
1,628
1,598
2,098
1,412
2,087
No. 112
Ref.
Debit
J1
J1
J1
J1
J1
1,150
800
5-27
Credit
Balance
500
30
675
1,150
1,950
1,450
1,420
745
PROBLEM 5-4A (Continued)
Merchandise Inventory
Date
Apr.
Explanation
1
4
6
8
10
11
13
14
15
17
18
21
Balance
No. 120
Ref.
T
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
Debit
Credit
640
40
750
40
300
18
700
50
30
530
14
Accounts Payable
Date
Apr.
Explanation
4
10
13
14
21
Ref.
J1
J1
J1
J1
J1
Apr.
Explanation
1
Balance
Debit
Credit
640
40
600
700
700
Balance
640
600
0
700
0
No. 301
Ref.
Debit
Credit
T
Balance
4,200
Sales
No. 401
Date
Apr.
1,700
2,340
2,380
1,630
1,590
1,890
1,872
2,572
2,522
2,552
2,022
2,008
No. 201
M. Young, Capital
Date
Balance
Explanation
8
18
Ref.
J1
J1
5-28
Debit
Credit
Balance
1,150
800
1,150
1,950
PROBLEM 5-4A (Continued)
Sales Returns and Allowances
Date
Explanation
No. 412
Debit
J1
Apr. 27
Ref.
Credit
30
30
Cost of Goods Sold
Date
Apr.
(c)
Explanation
8
18
Balance
No. 505
Ref.
Debit
J1
J1
Credit
750
530
Balance
750
1,280
MIKES TENNIS SHOP
Trial Balance
April 30, 2002
Cash ......................................................................................
Accounts Receivable...........................................................
Merchandise Inventory ........................................................
M. Young, Capital.................................................................
Sales .....................................................................................
Sales Returns and Allowances ...........................................
Cost of Goods Sold .............................................................
5-29
Debit
$2,087
745
2,008
Credit
$4,200
1,950
30
1,280
$6,150
00,000
$6,150
*PROBLEM 5-5A
5-30
*PROBLEM 5-5A (Continued)
(b)
BRENNAN FASHION CENTER
Income Statement
For the Year Ended November 30, 2002
Sales revenues
Sales ..............................................................
Less: Sales returns and
allowances....................................
Net sales .......................................................
Cost of goods sold ...............................................
Gross profit .......................................................
Operating expenses
Selling expenses
Salaries expense ..................................
($140,000 X 70%)
Advertising expense.............................
Rent expense ($24,000 X 80%).............
Delivery expense ..................................
Utilities expense ...................................
($14,000 X 80%)
Depreciation expense
store equipment................................
Depreciation expense
delivery equipment ...........................
Store supplies expense........................
Total selling expenses .................
Administrative expenses
Salaries expense ..................................
($140,000 X 30%)
Repair expense .....................................
Rent expense ($24,000 X 20%).............
Utilities expense
($14,000 X 20%).................................
Total administrative
expenses ...................................
Total operating
expenses........................
Income from operations .......................................
Other expenses and losses
Interest expense ...........................................
Net loss ................................................................
5-31
$759,200
4,200
755,000
498,000
257,000
$98,000
26,400
19,200
16,700
11,200
9,000
7,000
2,000
$189,500
42,000
12,100
4,800
2,800
61,700
251,200
5,800
11,000
$ 5,200
*PROBLEM 5-5A (Continued)
BRENNAN FASHION CENTER
Owners Equity Statement
For the Year Ended November 30, 2002
C. Brennan, Capital, December 1, 2001 ..................................
Less: Net loss ..........................................................................
Drawings ......................................................................
C. Brennan, Capital, November 30, 2002 ................................
$110,000
$ 5,200
12,000
17,200
$ 92,800
BRENNAN FASHION CENTER
Balance Sheet
November 30, 2002
Assets
Current assets
Cash ............................................................
Accounts receivable ..................................
Merchandise inventory..............................
Store supplies ............................................
Total current assets..........................
Property, plant, and equipment
Store equipment ........................................
Accumulated depreciation
store equipment.....................................
Delivery equipment....................................
Accumulated depreciation
delivery equipment ................................
Total assets .......................................
5-32
$ 28,700
33,700
44,400
3,500
110,300
$85,000
27,000
48,000
$58,000
13,000
35,000
93,000
$203,300
*PROBLEM 5-5A (Continued)
BRENNAN FASHION CENTER
Balance Sheet (Continued)
November 30, 2002
Liabilities and Owners Equity
Current liabilities
Notes payable due next year .................................................................
Accounts payable ...................................................................................
Interest payable ......................................................................................
Total current liabilities...................................................................
Long-term liabilities
Notes payable .........................................................................................
Total liabilities ................................................................................
Owners equity
C. Brennan, Capital.................................................................................
Total liabilities and owners equity...............................................
(c)
Nov. 30
30
30
30
30
Store Supplies Expense .....................................
Store Supplies ............................................
Depreciation ExpenseStore
Equipment........................................................
Accumulated Depreciation
Store Equipment.....................................
Depreciation ExpenseDelivery
Equipment........................................................
Accumulated Depreciation
Delivery Equipment................................
$ 30,000
48,500
11,000
89,500
21,000
110,500
92,800
$203,300
2,000
2,000
9,000
9,000
7,000
7,000
Interest Expense..................................................
Interest Payable..........................................
11,000
Cost of Goods Sold.............................................
Merchandise Inventory ..............................
600
5-33
11,000
600
*PROBLEM 5-5A (Continued)
(d)
Nov. 30
30
30
30
Sales..................................................................
Income Summary ....................................
759,200
Income Summary .............................................
Sales Returns and
Allowances...........................................
Cost of Goods Sold.................................
Salaries Expense.....................................
Advertising Expense...............................
Utilities Expense......................................
Repair Expense .......................................
Delivery Expense.....................................
Rent Expense...........................................
Store Supplies Expense .........................
Depreciation ExpenseStore
Equipment............................................
Depreciation ExpenseDelivery
Equipment............................................
Interest Expense......................................
764,400
C. Brennan, Capital ..........................................
Income Summary ....................................
5,200
C. Brennan, Capital ..........................................
C. Brennan, Drawing ...............................
12,000
5-34
759,200
4,200
498,000
140,000
26,400
14,000
12,100
16,700
24,000
2,000
9,000
7,000
11,000
5,200
12,000
*PROBLEM 5-5A (Continued)
(e)
BRENNAN FASHION CENTER
Post-Closing Trial Balance
November 30, 2002
Cash .............................................................................
Accounts Receivable..................................................
Merchandise Inventory ...............................................
Store Supplies.............................................................
Store Equipment .........................................................
Accumulated DepreciationStore
Equipment ...............................................................
Delivery Equipment.....................................................
Accumulated DepreciationDelivery
Equipment ...............................................................
Notes Payable .............................................................
Accounts Payable .......................................................
Interest Payable ..........................................................
C. Brennan, Capital.....................................................
5-35
Debit
$ 28,700
33,700
44,400
3,500
85,000
Credit
$ 27,000
48,000
0000,000
$243,300
13,000
51,000
48,500
11,000
92,800
$243,300
PROBLEM 5-1B
(a)
June
1
6
9
15
17
650
Accounts Receivable (140 X $10) ...........................
Sales ................................................................
1,400
Cost of Goods Sold (140 X $5)................................
Merchandise Inventory...................................
3
Merchandise Inventory (130 X $5) ..........................
Accounts Payable ...........................................
700
Accounts Payable (10 X $5) ....................................
Merchandise Inventory...................................
50
Accounts Payable ($650 $50)...............................
Merchandise Inventory...................................
($600 X .01)
Cash .................................................................
600
650
1,400
700
50
6
594
Cash .................................................................1,400
Accounts Receivable......................................
1,400
24
26
1,200
Cost of Goods Sold (120 X $5)................................
Merchandise Inventory...................................
20
Accounts Receivable (120 X $10) ...........................
Sales ................................................................
600
Merchandise Inventory (120 X $5) ..........................
Accounts Payable ...........................................
600
Cash .................................................................1,176
Sales Discounts ($1,200 X .02) ...............................
Accounts Receivable......................................
Accounts Payable ....................................................
Merchandise Inventory...................................
(600 X .02)
Cash .................................................................
5-36
1,200
600
600
24
1,200
600
12
588
PROBLEM 5-1B (Continued)
June
28
1,100
Cost of Goods Sold (110 X $5)................................
Merchandise Inventory...................................
30
Accounts Receivable (110 X $10) ...........................
Sales ................................................................
550
Sales Returns and Allowances...............................
(15 X $10)
Accounts Receivable......................................
150
Merchandise Inventory (15 X $5) ............................
Cost of Goods Sold ........................................
75
5-37
1,100
550
150
75
PROBLEM 5-2B
(a)
General Journal
J1
Date
May
1
2
5
9
10
11
12
15
Account Titles and Explanation
Merchandise Inventory
Accounts Payable
Ref.
120
201
Debit
6,000
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
4,700
Accounts Payable
Merchandise Inventory
201
120
200
Cash ($4,500 $90)
Sales Discounts ($4,500 X 2%)
Accounts Receivable
101
414
112
4,410
90
Accounts Payable ($6,000 $200)
Merchandise Inventory
($5,800 X 2%)
Cash
201
120
5,800
Supplies
Cash
126
101
900
Merchandise Inventory
Cash
120
101
2,400
Cash
101
120
230
Merchandise Inventory
Accounts Payable
120
201
1,900
Merchandise Inventory
Cash
120
101
250
Merchandise Inventory
17
19
5-38
Credit
6,000
4,700
3,100
3,100
200
4,500
116
101
5,684
900
2,400
230
1,900
250
PROBLEM 5-2B (Continued)
General Journal
J1
Date
May 24
25
27
29
31
Account Titles and Explanation
Cash
Sales
Cost of Goods Sold
Merchandise Inventory
Ref.
101
401
505
120
Debit
6,200
Merchandise Inventory
Accounts Payable
120
201
1,000
Accounts Payable
Merchandise Inventory
($1,900 X 2%)
Cash
201
120
1,900
Sales Returns and Allowances
Cash
Merchandise Inventory
Cost of Goods Sold
412
101
120
505
100
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
1,600
6,200
4,340
4,340
1,000
38
101
5-39
Credit
1,862
100
20
20
1,600
1,120
1,120
PROBLEM 5-2B (Continued)
(b)
Cash
No. 101
Date
May
Explanation
1
9
10
11
12
15
19
24
27
29
Balance
Ref.
T
J1
J1
J1
J1
J1
J1
J1
J1
J1
Debit
Credit
4,410
5,684
900
2,400
230
250
6,200
1,862
100
Accounts Receivable
Date
May
Explanation
Ref.
Debit
Credit
Balance
4,700
4,500
4,700
200
1,800
1,600
Merchandise Inventory
Date
May
Explanation
1
2
5
10
12
15
17
19
24
25
27
29
31
5,000
9,410
3,726
2,826
426
656
406
6,606
4,744
4,644
No. 112
J1
J1
J1
2
9
31
Balance
No. 120
Ref.
Debit
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
6,000
5-40
Credit
3,100
200
116
2,400
230
1,900
250
4,340
1,000
38
20
1,120
Balance
6,000
2,900
2,700
2,584
4,984
4,754
6,654
6,904
2,564
3,564
3,526
3,546
2,426
PROBLEM 5-2B (Continued)
Supplies
Date
No. 126
Explanation
May 11
Ref.
J1
Debit
Credit
900
900
Accounts Payable
Date
May
Explanation
1
5
10
17
25
27
No. 201
Ref.
J1
J1
J1
J1
J1
J1
Debit
Credit
Balance
6,000
6,000
5,800
0
1,900
2,900
1,000
200
5,800
1,900
1,000
1,900
J. Eagle, Capital
Date
May
Explanation
1
Balance
No. 301
Ref.
Debit
Credit
T
No. 401
Date
Explanation
2
24
31
Ref.
Debit
Balance
4,700
6,200
1,600
J1
J1
J1
Credit
4,700
10,900
12,500
Sales Returns and Allowances
Date
Explanation
May 29
No. 412
Ref.
J1
Debit
Credit
100
Date
Explanation
9
Balance
100
Sales Discounts
May
Balance
5,000
Sales
May
Balance
No. 414
Ref.
J1
5-41
Debit
90
Credit
Balance
90
PROBLEM 5-2B (Continued)
Cost of Goods Sold
Date
May
(c)
Explanation
2
24
29
31
No. 505
Ref.
Debit
J1
J1
J1
J1
Credit
3,100
4,340
Balance
3,100
7,440
7,420
8,540
20
1,120
EAGLE HARDWARE STORE
Income Statement (Partial)
For the Month Ended May 31, 2002
Sales revenues
Sales ................................................................................
Less: Sales returns and allowances ............................
Sales discounts .................................................
Net sales ..........................................................................
Cost of goods sold ..................................................................
Gross profit ..............................................................................
5-42
$12,500
$100
90
190
12,310
8,540
$ 3,770
PROBLEM 5-3B
(a)
FORCINA DEPARTMENT STORE
Income Statement
For the Year Ended November 30, 2002
Sales revenues
Sales ..............................................................
Less: Sales returns & allowances ..............
Net sales .......................................................
Cost of goods sold ...............................................
Gross profit .......................................................
Operating expenses
Selling expenses
Salaries expense ..................................
($120,000 X 70%)
Sales commissions expense ...............
Depreciation expensestore
equipment .........................................
Delivery expense ..................................
Insurance expense ...............................
($9,000 X 50%)
Depreciation expensedelivery
equipment .........................................
Total selling expenses .................
Administrative expenses
Salaries expense ..................................
($120,000 X 30%)
Rent expense ........................................
Utilities expense ...................................
Insurance expense ...............................
($9,000 X 50%)
Property tax expense ...........................
Total admin. expenses .................
Total oper. expenses............
Income from operations .......................................
Other revenues and gains
Interest revenue ............................................
Other expenses and losses
Interest expense ...........................................
Net income ............................................................
5-43
$850,000
10,000
840,000
633,220
206,780
$84,000
12,750
9,500
8,200
4,500
4,000
$122,950
36,000
19,000
10,600
4,500
3,500
73,600
196,550
10,230
5,000
8,000
$
3,000
7,230
PROBLEM 5-3B (Continued)
FORCINA DEPARTMENT STORE
Owners Equity Statement
For the Year Ended November 30, 2002
N. Forcina, Capital, December 1, 2001 .............................................................
Add: Net income ..............................................................................................
Less: Drawings .................................................................................................
N. Forcina, Capital, November 30, 2002...........................................................
$84,200
7,230
91,430
12,000
$79,430
FORCINA DEPARTMENT STORE
Balance Sheet
November 30, 2002
Assets
Current assets
Cash ..............................................................
Accounts receivable ....................................
Merchandise inventory................................
Prepaid insurance........................................
Total current assets............................
Property, plant, and equipment
Store equipment ..........................................
Less: Accumulated depreciation
store equipment..........................
Delivery equipment......................................
Less: Accumulated depreciation
delivery equipment .....................
Total assets .........................................
5-44
$
8,000
11,770
36,200
4,500
60,470
$125,000
41,800
57,000
$83,200
19,680
37,320
120,520
$180,990
PROBLEM 5-3B (Continued)
FORCINA DEPARTMENT STORE
Balance Sheet (Continued)
November 30, 2002
Liabilities and Owners Equity
Current liabilities
Accounts payable ...................................................................................
Property taxes payable...........................................................................
Sales commissions payable ..................................................................
Total current liabilities...................................................................
Long-term liabilities
Note payable due 2005 ...........................................................................
Total liabilities ................................................................................
Owners equity
N. Forcina, Capital ..................................................................................
Total liabilities and owners equity...............................................
(b)
Nov. 30
Nov. 30
3,500
Sales Commissions Expense...................................
Sales Commissions Payable ...........................
(c)
9,000
Property Tax Expense...............................................
Property Tax Payable.......................................
79,430
$180,990
9,500
Insurance Expense....................................................
Prepaid Insurance ............................................
46,000
101,560
4,000
Depreciation Expense...............................................
Accumulated Depreciation
Store Equipment...........................................
Nov. 30
Depreciation Expense...............................................
Accumulated Depreciation
Delivery Equipment......................................
$ 47,310
3,500
4,750
55,560
4,750
Sales..................................................................
Interest Revenue ..............................................
Income Summary ....................................
5-45
4,000
9,500
9,000
3,500
4,750
850,000
5,000
855,000
PROBLEM 5-3B (Continued)
Nov. 30
30
30
Income Summary .............................................
Sales Returns and
Allowances...........................................
Cost of Goods Sold.................................
Salaries Expense.....................................
Depreciation Expense
Delivery Equipment.............................
Delivery Expense.....................................
Sales Commissions Expense.................
Depreciation Expense
Store Equipment..................................
Insurance Expense..................................
Rent Expense...........................................
Property Tax Expense.............................
Utilities Expense......................................
Interest Expense......................................
847,770
Income Summary .............................................
N. Forcina, Capital...................................
7,230
N. Forcina, Capital............................................
N. Forcina, Drawing.................................
12,000
5-46
10,000
633,220
120,000
4,000
8,200
12,750
9,500
9,000
19,000
3,500
10,600
8,000
7,230
12,000
PROBLEM 5-4B
(a)
General Journal
J1
Date
Apr.
5
7
9
10
12
14
17
20
21
Account Titles and Explanation
Merchandise Inventory
Accounts Payable
Ref.
120
201
Debit
1,600
Merchandise Inventory
Cash
120
101
80
Accounts Payable
Merchandise Inventory
201
120
100
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
1,100
Merchandise Inventory
Accounts Payable
120
201
660
Accounts Payable ($1,600 $100)
Merchandise Inventory
($1,500 X 2%)
Cash
201
120
1,500
Accounts Payable
Merchandise Inventory
201
120
60
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
112
401
505
120
700
Accounts Payable ($660 $60)
Merchandise Inventory
($600 X 1%)
Cash
201
120
600
5-47
1,600
80
100
1,100
730
730
660
30
101
101
Credit
1,470
60
700
490
490
6
594
PROBLEM 5-4B (Continued)
J1
Date
Apr. 27
30
Account Titles and Explanation
Sales Returns and Allowances
Accounts Receivable
Ref.
412
112
Debit
30
Cash
101
112
1,200
Accounts Receivable
Credit
30
1,200
(b)
Cash
No. 101
Date
Apr.
Explanation
1
7
14
21
30
Balance
Ref.
T
J1
J1
J1
J1
Debit
Credit
Balance
80
1,470
594
2,500
2,420
950
356
1,556
1,200
Accounts Receivable
Date
Explanation
No. 112
Debit
J1
J1
J1
J1
Apr. 10
20
27
30
Ref.
Credit
Balance
1,100
700
30
1,200
1,100
1,800
1,770
570
Merchandise Inventory
Date
Apr.
Explanation
1
5
7
9
10
12
14
17
20
21
Balance
No. 120
Ref.
T
J1
J1
J1
J1
J1
J1
J1
J1
J1
5-48
Debit
Credit
1,600
80
100
730
660
30
60
490
6
Balance
3,500
5,100
5,180
5,080
4,350
5,010
4,980
4,920
4,430
4,424
PROBLEM 5-4B (Continued)
Accounts Payable
Date
Apr.
Explanation
5
9
12
14
17
21
No. 201
Ref.
J1
J1
J1
J1
J1
J1
Debit
Credit
Balance
1,600
1,600
1,500
2,160
660
600
0
100
660
1,500
60
600
G. Scott, Capital
Date
Apr.
Explanation
1
Balance
No. 301
Ref.
Debit
Credit
T
6,000
Sales
Date
No. 401
Explanation
Apr. 10
20
Ref.
Debit
Balance
1,100
700
J1
J1
Credit
1,100
1,800
Sales Returns and Allowances
Date
Explanation
Apr. 27
No. 412
Ref.
J1
Debit
Credit
30
Apr. 10
20
Explanation
Balance
30
Cost of Goods Sold
Date
Balance
No. 505
Ref.
J1
J1
5-49
Debit
730
490
Credit
Balance
730
1,220
PROBLEM 5-4B (Continued)
(c)
GREGS PRO SHOP
Trial Balance
April 30, 2002
Cash ......................................................................................
Accounts Receivable...........................................................
Merchandise Inventory ........................................................
G. Scott, Capital ...................................................................
Sales .....................................................................................
Sales Returns and Allowances ...........................................
Cost of Goods Sold .............................................................
5-50
Debit
$1,556
570
4,424
Credit
$6,000
1,800
30
1,220
$7,800
00,000
$7,800
*PROBLEM 5-5B
5-51
*PROBLEM 5-5B (Continued)
(b)
GRAHAM WHOLESALE COMPANY
Income Statement
For the Year Ended December 31, 2002
Sales revenues
Sales ................................................................
Less: Sales discounts ...................................
Net sales .........................................................
Cost of goods sold .................................................
Gross profit .........................................................
Operating expenses
Selling expenses
Salaries expense ....................................
($69,800 X 80%)
Gas and oil expense ...............................
Total selling expenses ...................
Administrative expenses
Salaries expense ....................................
($69,800 X 20%)
Depreciation expense
buildings..............................................
Utilities expense .....................................
Depreciation expense
equipment ...........................................
Repair expense .......................................
Insurance expense .................................
Total administrative
expenses .....................................
Total operating
expenses..........................
Income from operations .........................................
Other expenses and losses
Interest expense .............................................
Net income ..............................................................
5-52
$904,100
4,600
899,500
710,700
188,800
$55,840
7,200
$63,040
13,960
10,000
19,400
9,000
5,900
3,500
61,760
124,800
64,000
7,000
$ 57,000
*PROBLEM 5-5B (Continued)
GRAHAM WHOLESALE COMPANY
Owners Equity Statement
For the Year Ended December 31, 2002
M. Graham, Capital, January 1........................................................................
Add: Net income ............................................................................................
Less: Drawings ...............................................................................................
M. Graham, Capital, December 31 ..................................................................
$267,800
57,000
324,800
10,000
$314,800
GRAHAM WHOLESALE COMPANY
Balance Sheet
December 31, 2002
Assets
Current assets
Cash .......................................................
Accounts receivable .............................
Merchandise inventory.........................
Total current assets.....................
Property, plant, and equipment
Land .......................................................
Buildings ...............................................
Less: Accum. depreciation .................
Equipment .............................................
Less: Accum. depreciation .................
Total assets ..................................
$ 25,400
37,600
89,200
152,200
$ 92,000
$197,000
64,000
83,500
51,400
133,000
32,100
257,100
$409,300
Liabilities and Owners Equity
Current liabilities
Notes payable due in 2003 .....................................................................
Accounts payable ...................................................................................
Interest payable ......................................................................................
Total current liabilities...................................................................
Long-term liabilities
Notes payable due after 2003 ................................................................
Total liabilities ................................................................................
Owners equity
M. Graham, Capital .................................................................................
Total liabilities and owners equity...............................................
5-53
$ 15,000
37,500
7,000
59,500
35,000
94,500
314,800
$409,300
*PROBLEM 5-5B (Continued)
(c)
Dec. 31
31
31
31
(d)
Dec. 31
31
31
31
Depreciation ExpenseBuildings .....................
Accumulated Depreciation
Buildings .................................................
10,000
Depreciation ExpenseEquipment ...................
Accumulated Depreciation
Equipment ...............................................
9,000
Interest Expense..................................................
Interest Payable ..........................................
7,000
Cost of Goods Sold .............................................
Merchandise Inventory...............................
800
10,000
9,000
7,000
800
Sales ..................................................................
Income Summary.....................................
904,100
Income Summary..............................................
Sales Discounts .......................................
Cost of Goods Sold .................................
Salaries Expense .....................................
Utilities Expense ......................................
Repair Expense........................................
Gas and Oil Expense ...............................
Insurance Expense ..................................
Depreciation Expense
Buildings ..............................................
Depreciation Expense
Equipment ............................................
Interest Expense ......................................
847,100
Income Summary..............................................
M. Graham, Capital ..................................
57,000
M. Graham, Capital ...........................................
M. Graham, Drawing ................................
10,000
5-54
904,100
4,600
710,700
69,800
19,400
5,900
7,200
3,500
10,000
9,000
7,000
57,000
10,000
*PROBLEM 5-5B (Continued)
(e)
GRAHAM WHOLESALE COMPANY
Post-Closing Trial Balance
December 31, 2002
Cash .............................................................................
Accounts Receivable ..................................................
Merchandise Inventory ...............................................
Land .............................................................................
Buildings......................................................................
Accumulated DepreciationBuildings .....................
Equipment ...................................................................
Accumulated DepreciationEquipment...................
Notes Payable .............................................................
Accounts Payable .......................................................
Interest Payable ..........................................................
M. Graham, Capital .....................................................
5-55
Debit
$ 25,400
37,600
89,200
92,000
197,000
Credit
$ 64,000
83,500
0000,000
$524,700
51,400
50,000
37,500
7,000
314,800
$524,700