On October 1, Taylor Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $200 each. During the month of October, the following transactions occurred.
Oct. 4 Purchased 25 bicycles at a cost of $200 each from Lang Bicycle Company, terms 2/10, n/30
Dr Merchandise inventory 5,000
Cr A/cs payable 5,000
6 Sold 15 bicycles to Team America for $300 each, terms 2/10, n/30
Dr A/cs receivable 4,500
Cr Sales 4,500
Dr COGS 3,000
Cr Merchandise inventory 3,000
7 Received credit from Lang Bicycle Company for the return of 2 defective bicycles
Dr AP 400
Cr Merchandise inventory 400
13 Issued a credit memo to Team America for the return of a defective bicycle
Dr Sales returns 300
Cr AR 300
(I'm not adjusting COGS on the basis that the bicycle is defective and cannot be sold again)
14 Paid Lang Bicycle Company in full, less discount
Dr AP 4,600
Cr Purchase discount 92
Cr Cash 4,508
Ex. 2
Prepare the necessary journal entries to record the following transactions, assuming Lewis Company uses a perpetual inventory system
(a)Lewis sells $40,000 Wayne Lippman Tax Preparer of merchandise, terms 1/10, n/30. The merchandise cost $30,000
Dr AR 40k
Cr Sales 40k
http://www.youtube.com/watch?v=SoaGUgzoljs
Dr COGS 30k
Cr Merchandise inventory 30k
(b)The customer in (a) returned $4,000 of merchandise to Lewis. The merchandise returned cost $3,000
Dr Sales 4k
Cr AR 4k
Dr Merch. inv. 3k
Cr COGS 3k
(c)Lewis received the balance due within the discount period.
Dr Cash 35,640
Dr Sales discount 360
Cr AR 36,000
Ex. 3
Closing entries:
Dr Sales 510,000
Dr Interest revenue 25,000
Cr Income summary 535,000
Dr Income summary 470,000
Cr Sales Returns and Allowances 20,000
Cr Sales Discounts 7,000
Cr Cost of Goods Sold 337,000
Cr Freight-out 2,000
Cr Advertising Expense 15,000
Cr Interest Expense 19,000
Cr Store Salaries Expense 45,000
Cr Utilities Expense 18,000
Cr Depreciation Expense 7,000
Dr Income summary 65,000
Cr Retained earnings 65,000
Dr Capital 42,000
Cr Drawings 42,000
Ex. 4
multiple-step income statement
Sales $580,000
Less:
Sales Returns and Allowances $20,000
Sales Discounts 7,000
Net sales $553,000
Less:
Cost of Goods Sold 386,000
Gross profit $167,000
Less:
Operating expenses
Selling expenses -
- Freight-out 2,000
- Advertising Expense 15,000
General & admin. expenses -
- Store Salaries Expense 50,000
- Utilities Expense 28,000
- Depreciation Expense 7,000
Operating income $65,000
Non-operating or other
Interest Revenue 30,000
Interest Expense (18,000)
Net income $77,000
Ex. 5
(a) Cost of goods sold
Net sales $900,000 - Gross profit 350,000 = COGS $550,000
(b) Cost of goods available for sale -
Beginning inventory 100,000
Purchases 540,000
Purchase discounts (15,000)
Purchase returns and allowances (8,000)
Freight-in 10,000
Cost of gds available for sale $627,000
(c) Ending inventory
Cost of gds available for sale $627k - COGS $550k = Ending inventory $77k
Ex. 6
Morton Company uses the periodic inventory method and had the following inventory information available:
1/1 Beginning Inventory 100 $4 $400
1/20 Purchase 400 $5 $2,000
7/25 Purchase 200 $7 $1,400
10/20 Purchase 300 $8 $2,400
Total 1,000units costing $6,200
A physical count of inventory on December 31 revealed that there were 350 units on hand, i.e. 650 units were sold
1.Assume that the company uses the FIFO method. The value of the ending inventory at Dec 31 is $2,750
2.Assume that the company uses the Average Cost method. The value of the ending inventory on Dec 31 is $2,170
3.Assume that the company uses the LIFO method. The value of the ending inventory on Dec 31 is $1,650
Ex. 7
1.Mr. Dexter invested cash in the business (CR)
2.Purchased store supplies on account. (G)
3.Sold merchandise to customer on account. (S)
4.Purchased a 2-year fire insurance policy for cash. (G)
5.Received a check from a customer as payment on account(CR)
6.Paid for store supplies purchased in transaction 2. (CP)
7.Purchased merchandise on account. (P)
8.Issued a credit memorandum to a customer who returned defective merchandise previously sold on account. (G)
9.Purchased office equipment for cash. (G)
10.Made an adjusting entry for store supplies used during the period. (G)
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