exercise 15 - ACCOUNTING Exercise 15 Sher-Wood Hockey...

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Unformatted text preview: ACCOUNTING Exercise 15 Sher-Wood Hockey Sticks 1 ECONOMIC EVENTS 2 1. Spend $6,000,000 to make 300,000 hockey sticks. 2. Sell 200,000 hockey sticks, on credit, for $50 each, plus 8% sales tax. 3. Record $4,000,000 Cost of Sales. 4. Record estimated warranty costs of $20,000. 5. Customers return 10,000 hockey sticks. 6. Record the returned inventory. 7. Customers pay balance within 10 days. Terms are 2/10, N30. 8. Pay sales tax to the state. 9. Sell 50,000 hockey sticks, on credit, for $50 each, to a customer in Europe. We invoice the customer in Euros. The exchange rate is $1.00 = one Euro. 10. Record $1,000,000 Cost of Sales. 11. Pay $10,000 for warranty costs. ECONOMIC EVENTS 3 12. Receive a 200,000 Euro invoice from a European advertising agency when the exchange rate is $1.00 = one Euro. 13. Pay $200,000 to buy back some of our company’s stock. 14. The Europe customer sends us 2,500,000 Euros. We convert the Euros to dollars when the exchange rate is $1.00 = 0.80 Euros. 15. We buy 200,000 Euros to pay the European advertising agency when the exchange rate is $1.00 = 0.80 Euros. 16. Transfer Net Income (loss) to Retained Earnings. JOURNAL ENTRIES 1. 2. 3. 4. 5. 4 JOURNAL ENTRIES 6. 7. 8. 9. 10. 5 JOURNAL ENTRIES 11. 12. 13. 14. 15. 6 JOURNAL ENTRIES 16. 17. 18. 19. 20. 7 8 Cash Reference Transaction Debit Current Balance Credit Debit 20,000,000 Credit 9 Common Stock Reference Transaction Debit Current Balance Credit Debit Credit 10,000,000 10 Paid in Capital Reference Transaction Debit Current Balance Credit Debit Credit 5,000,000 Retained Earnings Reference Transaction Debit 11 Current Balance Credit Debit Credit 5,000,000 12 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 13 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 14 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 15 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 16 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 17 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 18 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 19 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 20 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 21 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 22 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 23 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 24 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 25 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 26 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 27 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 28 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 29 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 30 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 31 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit 32 _________________ A/C Reference Transaction Debit Current Balance Credit Debit Credit Account Total TRIAL BALANCE Debit 33 Credit BALANCE SHEET Current Assets Current Liabilities Long Term Assets Long Term Liabilities Stockholders Equity Total Total 34 35 INCOME STATEMENT Revenue Expense Net Income (Loss) 36 JOURNAL ENTRY ANSWERS 1. Dr Inventory 6,000,000 Cr Cash 6,000,000 (6,000,000 / 300,000 = $20 per hockey stick) 2. Accounts Receivable (10,000,000 x 108%)10,800,000 Cr Sales ( 200,000 x $50) 10,000,000 Cr Sales Tax Payable (10,000,000 x 8%) 800,000 3. Dr Cost of Sales (200,000 x $20) 4,000,000 Cr Inventory 4,000,000 4. Dr Warranty Expense 20,000 Cr Warranty Liability 20,000 5. Dr Sales Returns 500,000 Dr Sales Tax Payable (500,000 x 8%) 40,000 Cr Accounts Receivable (500,000 x 108%) 540,000 37 JOURNAL ENTRY ANSWERS 6. Dr Inventory (10,000 x $20) 200,000 Cr Cost of Sales 200,000 7. Dr Cash (10,260,000 x 98%) 10,054,800 Dr Sales Discounts (9,500,000 x 2%) 190,000 Dr Sales Tax Payable (760,000 x 2%) 15,200 Cr Accounts Receivable (10,260,000 x 100%) 10,260,000 8. Dr Sales Tax Payable 744,800 Dr Cash 744,800 9. Dr Accounts Receivable (50,000 x $50) 2,500,000 Cr Sales 2,500,000 10. Dr Cost of Sales (50,000 x $20) 1,000,000 Cr Inventory 1,000,000 38 JOURNAL ENTRY ANSWERS 11. Dr Warranty Liability 10,000 Cr Cash 10,000 12. Dr Advertising Expense 200,000 Cr Accounts Payable 200,000 13. Dr Treasury Stock 200,000 Cr Cash 200,000 14. Dr Cash (2,500,000 / ,80) 3,125,000 Cr Accounts Receivable 2,500,000 Cr Foreign Exchange Gain 625,000 15. Dr Accounts Payable 200,000 Dr Foreign Exchange Loss 50,000 Cr Cash (200,000 / .80) 39 JOURNAL ENTRY ANSWERS 16. Dr Net Income 7,365,000 Cr Retained Earnings 7,365,000 40 Cash Reference Transaction Debit Current Balance Credit Debit 20,000,000 GJ1 GJ7 6,000,000 10,054,800 14,000,000 24,054,800 GJ8 744,800 23,310,000 GJ11 10,000 23,300,000 GJ13 200,000 23,100,000 GJ14 GJ15 3,125,000 26,225,000 250,000 25,975,000 Credit Common Stock A/C Reference Transaction Debit 41 Current Balance Credit Debit Credit 10,000,000 42 Paid in Capital Reference Transaction Debit Current Balance Credit Debit Credit 5,000,000 Retained Earnings Reference Transaction Debit 43 Current Balance Credit Debit Credit 5,000,000 GJ16 7,365,000 12,365,000 44 Inventory A/C Reference Transaction Debit GJ1 GJ9 Credit 6,000,000 GJ3 GJ6 Current Balance Debit 6,000,000 4,000,000 200,000 2,000,000 2,200,000 1,000,000 1,200,000 Credit 45 Accounts Receivable Reference Transaction Debit GJ2 Current Balance Credit 10,800,000 Debit Credit 10,800,000 GJ5 540,000 10,260,000 GJ7 10,260,000 0 GJ9 GJ14 2,500,000 2,500,000 2,500,000 0 46 Sales Reference Transaction Debit Current Balance Credit Debit Credit GJ2 10,000,000 10,000,000 GJ9 2,500,000 12,500,000 Sales Tax Payable Reference Transaction Debit GJ2 47 Current Balance Credit 800,000 Debit Credit 800,000 GJ5 40,000 760,000 GJ7 15,200 744,800 GJ8 744,800 0 48 Cost of Sales Reference Transaction Debit GJ3 Credit 4,000,000 GJ6 GJ9 Current Balance 4,000,000 200,000 1,000,000 Debit 3,800,000 4,800,000 Credit 49 Warranty Expense Reference Transaction Debit GJ4 20,000 Current Balance Credit Debit 20,000 Credit 50 Warranty Liability Reference Transaction Debit GJ4 GJ11 Current Balance Credit 20,000 10,000 Debit Credit 20,000 10,000 51 Sales Returns Reference Transaction Debit GJ5 500,000 Current Balance Credit Debit 500,000 Credit 52 Sales Discounts Reference Transaction Debit GJ7 190,000 Current Balance Credit Debit 190,000 Credit Advertising Expense Reference Transaction Debit GJ12 200,000 53 Current Balance Credit Debit 200,000 Credit 54 Accounts Payable Reference Transaction Debit GJ12 GJ15 Current Balance Credit 200,000 200,000 Debit Credit 200,000 0 55 Treasury Stock Reference Transaction Debit GJ13 200,000 Current Balance Credit Debit 200,000 Credit Foreign Exchange Gain Reference Transaction Debit GJ14 56 Current Balance Credit 625,000 Debit Credit 625,000 Foreign Exchange Loss Reference Transaction Debit GJ15 50,000 57 Current Balance Credit Debit 50,000 Credit 58 Net Income Reference Transaction Debit GJ16 7,365,000 Current Balance Credit Debit 7,365,000 Credit Account TRIAL BALANCE Cash 59 Debit Credit 25,975,000 Common Stock 10,000,000 Paid in Capital 5,000,000 Retained Earnings 12,365,000 Inventory Accounts Receivable 1,200,000 0 Sales 12,500,000 Sales Tax Payable Cost of Sales Warranty Expense 0 4,800,000 20,000 Warranty Liability 10,000 Sales Returns 500,000 Sales Discounts 190,000 Advertising Expense 200,000 Accounts Payable Treasury Stock 0 200,000 Foreign Exchange Gain Foreign Exchange Loss 625,000 50,000 Net Income 7,365,000 Total 40,500,000 40,500,000 BALANCE SHEET Current Assets Cash Accounts Receivable Inventory 60 Current Liabilities 25,975,000 0 Warranty Liability Sales Tax Payable 10,000 0 1,200,000 Long Term Assets Long Term Liabilities Stockholders Equity Common Stock 10,000,000 Paid in Capital 5,000,000 Retained Earnings 12,365,000 Treasury Stock Total 27,175,000 Total (200,000) 27,175,000 61 INCOME STATEMENT Revenue Sales 12,500,000 Sales Returns 500,000 Sales Discounts 190,000 Net Sales 11,810,000 Cost of Sales 4,800,000 Gross Profit 7,010,000 Foreign Exchange Gain 625,000 Expense Warranty Expense 20,000 Advertising Expense 200,000 Foreign Exchange Loss 50,000 Net Income (Loss) 7,365,000 Hockey Stick 62 Video 15 Sticks made by the company are 0% ts en se s 0% E xp ss e 2. Assets Expenses A 1. Hockey Stick 63 Video 15 Silk screen machine 0% n s t e 0% E x p e s s e 2. Asset Expense A 1. 64 1. Spend $6,000,000 to make 300,000 hockey sticks. $6,000,000 / 300,000 = $20 cost per stick 15 Ca sh 6,0 0 0,0 00 0% Dr 6,0 00 ,00 0 0% In ve nt or y 2. Dr Inventory 6,000,000 Cr Cash 6,000,000 Dr Cash 6,000,000 Cr Inventory 6,000,000 Dr 1. 65 2. Sell 200,000 hockey sticks, on credit, for $50 each, plus 8% sales tax. Sales…..200,000 x $50 = $10,000,000 Sales Tax….. $10,000,000 x 8% = $800,000 Accounts Receivable…..10,000,000 + 800,000 = 10,800,000 Re ce iva b. Sa . les 10 Dr ,80 Ac 0,0 co 00 un ts Re ce iva Dr b.. Sa l es 10 ,00 0,0 00 4. 0% 0% 0% 0% Dr 3. un ts 2. Dr Accounts Receivable 10,800,000 Cr Sales 10,800,000 Dr Sales 10,800,000 Cr Accounts Receivable 10,800,000 Dr Accounts Receivable 10,800,000 Cr Sales 10,000,000 Cr Sales Tax Payable 800,000 Dr Sales 10,000,000 Dr Sales Tax Payable 800,000 Ac co 1. Dr 15 66 3. Record $4,000,000 Cost of Sales 200,000 sticks x $200 = $4,000,000 s4 Inv ,0 0.. en . to ry Ex Dr pe ns Inv ... en to ry 4,0 00 ,00 0 0 ale ,00 Dr of S 4,0 00 Co st 4. 0% 0% 0% 0% Dr 3. en to ry 2. Dr Inventory 4,000,000 Cr Cost of Sales 4,000,000 Dr Cost of Sales 4,000,000 Cr Inventory 4,000,000 Dr Inventory Expense 4,000,000 Cr Inventory 4,000,000 Dr Inventory 4,000,000 Cr Inventory Expense 4,000,000 Inv 1. Dr 15 67 4. Record estimated warranty costs of $20,000. 0% Dr W ar ra nt yE xp iab ilit y. en se ... .. 0% ar ra nt yL 2. Dr Warranty Liability 20,000 Cr Warranty Expense 20,000 Dr Warranty Expense 20,000 Cr Warranty Liability 20,000 W 1. Dr 15 68 5. Customers return 10,000 hockey sticks Sales Returns…..10,000 x $50 = 500,000 Sales Tax …..500,000 x 8% = 40,000 Accounts Receivable…..500,000 + 40,000 = 540,000 Dr ou Sa le nt s Re c ei v ab sR .. et ur Dr ns Ac 50 co 0.. un . ts Re ce iva ... .. 54 0. ur ns Ac c Dr 4. 0% 0% 0% 0% sR et 3. Sa le 2. Dr Sales Returns 540,000 Cr Accounts Receivable 540,000 Dr Accounts Receivable 540,000 Cr Sales Returns 540,000 Dr Sales Returns 500,000 Dr Sales Tax Payable 40,000 Cr Accounts Receivable 540,000 Dr Accounts Receivable 540,000 Cr Sales Returns 500,000 Cr Sales Tax Payable 40,000 Dr 15 1. 69 6. Record the returned inventory. 10,000 x $20 = 200,000 00 Inv ,00 en 0 to Dr ry Inv 20 0,0 en to 00 ry Ex pe Dr ns e.. Inv . en to ry 20 0,0 00 s2 ale Dr 4. 0% 0% 0% 0% to fS 3. Co s 2. Dr Cost of Sales 200,000 Cr Inventory 200,000 Dr Inventory 200,000 Cr Cost of Sales 200,000 Dr Inventory Expense 200,000 Cr Inventory 200,000 Dr Inventory 200,000 Cr Inventory Expense 200,000 Dr 15 1. 70 7. Customers pay balance within 10 days. Terms are 2/10, N30. Net Sales..10,000,000 – 500,000 = 9,500,000 x 2% = 190,000 Sales Discount Sales Tax Payable..800,000 – 40,000 = 760,000 x 2% = 15,200 Cash Received…..A/R 10,260,000 – 190,000 – 15,200 = 10,054,800 Re ce iva b. Ca . sh 10 Dr ,26 Ac 0,0 co 00 un ts Re ce iva Dr b.. Ca sh 10 ,05 4,8 00 4. Dr 3. 0% 0% 0% 0% un ts 2. Ac co 15 Dr Accounts Receivable 10,260,000 Cr Cash 10,054,800 Cr Sales Discounts 190,000 Cr Sales Tax Payable 15,200 Dr Cash 10,260,000 Cr Accounts Receivable 10,260,000 Dr Accounts Receivable 10,260,000 Cr Cash 10,260,000 Dr Cash 10,054,800 Dr Sales Discounts 190,000 Dr Sales Tax Payable 15,200 Dr 1. 71 8. Pay 744,800 sales tax to the state. 0 Ca s h ble Dr Pa ya ax sT Sa le Dr 74 4 ... ... ns Ex pe ax ,80 0 ,80 44 h7 sT 4. Sa le 3. 0% 0% 0% 0% Ca s 2. Dr Cash 744,800 Cr Sales Tax Expense 744,800 Dr Sales Tax Expense 744,800 Cr Cash 744,800 Dr Sales Tax Payable 744,800 Cr Cash 744,800 Dr Cash 744,800 Cr Sales Tax Payable 744,800 Dr 1. Dr 15 72 9. Sell 50,000 hockey sticks, on credit, for $50 each, to a customer in Europe. We invoice the customer in Euros. The exchange rate is $1.00 = 1.00 Euro. 50,000 x $50 = 2,500,000 15 0% Dr Ac co un ts Re cei vab .. 2,5 00, 000 0% Sa les 2. Dr Sales 2,500,000 Cr Accounts Receivable 2,500,000 Dr Accounts Receivable 2,500,000 Cr Sales 2,500,000 Dr 1. 73 10. Record $1,000,000 Cost of Sales. 50,000 x $20 = 1,000,000 00 y1 ,00 0,0 ent or Dr Inv ory Ex pen se. .. 1,0 00, 000 Dr Inv ent ory s1 ,0.. . 0% 0% 0% 0% ale 4. Inv ent 3. Dr 2. Co st of S 15 Dr Cost of Sales 1,000,000 Cr Inventory 1,000,000 Dr Inventory 1,000,000 Cr Cost of Sales 1,000,000 Dr Inventory Expense 1,000,000 Cr Inventory 1,000,000 Dr Inventory 1,000,000 Cr Inventory Expense 1,000,000 Dr 1. 74 11. Pay $10,000 for warranty costs. 0 ,00 iab ilit y Dr ... Ca sh 10 ,00 0 10 Wa rra nty L Dr 4. 0% 0% 0% 0% pe nse Dr ... Ca sh 3. Ex 2. Dr Warranty Expense 10,000 Cr Cash 10,000 Dr Cash 10,000 Cr Warranty Expense 10,000 Dr Warranty Liability 10,000 Cr Cash 10,000 Dr Cash 10,000 Cr Warranty Liability 10,000 Wa rra nty 1. Dr 15 75 12. Receive a 200,000 Euro invoice from a European advertising agency when the exchange rate is $1.00 = 1.00 Euro. 15 gE xpe n.. 0% Ad ver tis in Dr nts Pa yab l... 0% Ac co u 2. Dr Accounts Payable 200,000 Cr Advertising Expense 200,000 Dr Advertising Expense 200,000 Cr Accounts Payable 200,000 Dr 1. 76 13. Pay $200,000 to buy back some of our company’s stock. 0,0 00 Sto ck 2 Dr 0... Ca sh 20 00, 000 Tre asu ry 4. 0% 0% 0% 0% Dr 3. ves tm en Dr t ... Ca sh 2 2. Dr Stock Investment 200,000 Cr Cash 200,000 Dr Cash 200,000 Cr Treasury Stock 200,000 Dr Treasury Stock 200,000 Cr Cash 200,000 Dr Cash 200,000 Cr Stock Investment 200,000 Sto ck In 1. Dr 15 77 14. The Europe customer sends us 2,500,000 Euros. We convert the Euros to dollars when the exchange rate is $1.00 = 0.80 Euros. Cash received…2,500,000 / .80 = 3,125,000 Gain….Cash received 3,125,000 – A/R 2,500,000 = 625,000 Re ce iva b.. Ca sh 3, 1 25 Dr ,00 Ca 0 sh 3,1 25 ,00 0 Dr 0, 0 00 nts Ca sh 2,5 0 4. 0% 0% 0% 0% Ac co u 3. Dr 2. Dr Cash 2,500,000 Cr Accounts Receivable 2,500,000 Dr Accounts Receivable 2,500,000 Cr Cash 2,500,000 Dr Cash 3,125,000 Cr Accounts Receivable 2,500,000 Cr Sales 625,000 Dr Cash 3,125,000 Cr Accounts Receivable 2,500,000 Dr 15 1. 78 15. We buy 200,000 Euros to pay the European advertising agency when the exchange rate is $1.00 = 0.80 Euros. Cash paid…..200,000 / .80 = 250,000 Loss….Cash paid 250,000 – A/P 200,000 = 50,000 Pa yab le.. un . ts Pa Dr yab Ac le.. co un . ts Pa yab Dr le... Ca sh 20 0,0 00 nts Ac co 4. Dr 3. 0% 0% 0% 0% Ac co u 2. Dr Accounts Payable 200,000 Dr Foreign Exchange Loss 50,000 Cr Cash 250,000 Dr Accounts Payable 200,000 Dr Advertising Expense 50,000 Cr Cash 250,000 Dr Accounts Payable 200,000 Cr Cash 200,000 Dr Cash 200,000 Cr Accounts Payable 200,000 Dr 15 1. 79 16. Transfer 7,365,000 Net Income to Retained Earnings. 0% 7,3 65, 0 me Ne t In co Dr i ne dE arn i ng s.. . 00 0% Re ta 2. Dr Retained Earnings 7,365,000 Cr Net Income 7,365,000 Dr Net Income 7,365,000 Cr Retained Earnings 7,365,000 Dr 15 1. SHER WOOD HOCKEY80 BAD MANAGEMENT 81 LORD OF THE RINGS 82 83 ...
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This note was uploaded on 11/03/2010 for the course ACCT 325 taught by Professor Anderson,p during the Winter '09 term at Azusa Pacific.

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exercise 15 - ACCOUNTING Exercise 15 Sher-Wood Hockey...

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