chapter 5

chapter 5 - BUSI1002 Introduction to accounting tutorial...

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BUSI1002 Introduction to accounting tutorial assignment solution AS1 Chapter 5 Quick Study 5-4 (10 minutes) July 31 Cost of Goods Sold . ........................................................................ 1,400 Merchandise Inventory . ....................................................... 1,400 To adjust for shrinkage based on physical count [$42,000 - $40,600]. Quick Study 5-6 (10 minutes) Acid-test ratio = ($3,000 + $5,580) / ($11,500 + $1,700) = 0.65 Explanation of acid-test ratio : The acid-test ratio is used to evaluate (reflect on) the liquidity of a company. It helps in determining whether a company will be able to meet its current obligations as they come due with its most liquid assets. In this case, the company only has 65 cents available in quick assets to pay $1.00 in current liabilities as they come due. An acid-test ratio less than one usually suggests some concern and encourages further analysis of liquidity Problem 5-2A (40 minutes) Aug. 1 Merchandise Inventory. ................................................................ 7,800 Accounts Payable—Arotek. ............................................... 7,800 Purchased goods on credit, terms 1/10, n/30. 4 Accounts Payable—Arotek. ......................................................... 270 Cash. .................................................................................... 270 Paid freight for Arotek. 5 Accounts Receivable—Larton. .................................................... 5,460 Sales. ................................................................................... 5,460 Sold goods on credit, terms 2/10, n/60. 5 Cost of Goods Sold. ...................................................................... 3,898 Merchandise Inventory. ...................................................... 3,898 To record the cost of August 5 sale. 8 Merchandise Inventory. ................................................................ 7,100 Accounts Payable—Frees. .................................................. 7,100 Purchased goods on credit, terms 1/10, n/45. 8 Merchandise Inventory. ................................................................ 240
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BUSI1002 Introduction to accounting tutorial assignment solution AS2 Accounts Payable—Frees. ..................................................... 240 To record shipping charges paid by Frees on August 8 purchase . Instructor note: It is fine to combine the two August 8 entries into one. 9
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chapter 5 - BUSI1002 Introduction to accounting tutorial...

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