POA11e06 - CHAPTER 6Solutions THE OPERATING CYCLE AND...

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Ch6 SE1 to SE3 CHAPTER 6—Solutions THE OPERATING CYCLE AND MERCHANDISING OPERATIONS Chapter 6, SE 1. 1. a 2. c 3. a 4. b Chapter 6, SE 2. Days to sell inventory 40 Add days to collect for the sale 25 Less creditors' payment terms (33) Financing period 32 Chapter 6, SE 3. List price $12,000 Less 40 percent trade discount 4,800 Dealer price $ 7,200 Shipping cost 700 Cost of machine $ 7,900 Less sales discount ( $7,200 × 2% ) 144 Net cost of machine $ 7,756
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Ch6 SE4 to SE5 Chapter 6, SE 4. Merchandise value: $5,000 $850 = $4,150 Discount: $4,150 x 2% = $83 Payment: $4,150 $83 = $4,067 Chapter 6, SE 5. T accounts set up and entries posted Cash Accounts Payable Freight-In 8/10 970* 8/07 180 8/02 1,150 8/03 105 Bal.** 970 8/10 970 8/03 105 Bal. 105 1,150 1,255 Bal. 105 Merchandise Inventory 8/02 1,150 8/07 180 1,150 180 Bal. 970 *$1,150 $180 = $970 **The balance of Cash is a credit because there is no data about the beginning balance and only one entry has been posted to the credit side of the account. *
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Ch6 SE6 Chapter 6, SE 6. T accounts set up and entries posted Cash Accounts Payable Freight-In 8/10 970 8/07 180 8/02 1,150 8/03 105 Bal.** 970 8/10 970 8/03 105 Bal. 105 1,150 1,255 Bal. 105 Purchases 8/02 1,150 Bal. 1,150 Purchases Returns and Allowances 8/07 180 Bal. 180 *$1,150 $180 = $970 **The balance of Cash is a credit because there is no data about the beginning balance and only one entry has been posted to the credit side of the account. * +
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Ch6 SE7 Chapter 6, SE 7. Purchases: $282,900 Cost of goods sold Merchandise inventory, September 30, 2011 $ 37,950 Purchases $282,900 Less purchases returns and allowances 10,350 Net purchases $272,550 Freight-in 13,800 Net cost of purchases 286,350 Cost of goods available for sale $324,300 Less merchandise inventory, October 31, 2011 50,600 Cost of goods sold $273,700
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Ch6 SE8 Chapter 6, SE 8. T accounts set up and entries posted Cash Sales 9/03 3,570 8/05 462 8/04 5,040 Bal. 3,108 Bal. 5,040 Sales Returns Accounts Receivable and Allowances 8/04 5,040 8/09 1,470 8/09 1,470 9/03 3,570 Bal. 1,470 5,040 5,040 Bal. Freight-Out 8/05 462 Bal. 462 $5,040 $1,470 = $3,570 * *
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Ch6 E1 to E3 Chapter 6, E 1. 1. Yes, a company can have a negative financing period if its merchandise is held for a very short time, if its sales are mostly for cash, or if it has long terms to pay its suppliers. 2. Because the exchange rate for the dollar is declining as it relates to the euro, the dollar can buy more euros. Therefore, you would want the eventual payment to be made in dollars. 3. The perpetual inventory system is more useful to management because under this system management is always able to tell if an item of inventory is available if a customer asks for it. Chapter 6, E 2.
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POA11e06 - CHAPTER 6Solutions THE OPERATING CYCLE AND...

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