ACCT 211 Homework 4 Merchandising Operations Problems Assignment solutions complete answers

ACCT 211 Homework 4 Merchandising Operations Problems Assignment solutions complete answers 

 

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Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method.
 

July 1
Purchased merchandise from Boden Company for $6,100 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1.
July 2
Sold merchandise to Creek Company for $950 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $508.
July 3
Paid $105 cash for freight charges on the purchase of July 1.
July 8
Sold merchandise that had cost $1,400 for $1,800 cash.
July 9
Purchased merchandise from Leight Company for $2,700 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
July 11
Returned $700 of merchandise purchased on July 9 from Leight Company and debited its account payable for that amount.
July 12
Received the balance due from Creek Company for the invoice dated July 2, net of the discount.
July 16
Paid the balance due to Boden Company within the discount period.
July 19
Sold merchandise that cost $800 to Art Company for $1,200 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
July 21
Gave a price reduction (allowance) of $200 to Art Company for merchandise sold on July 19 and credited Art's accounts receivable for that amount.
July 24
Paid Leight Company the balance due, net of discount.
July 30
Received the balance due from Art Company for the invoice dated July 19, net of discount.
July 31
Sold merchandise that cost $4,900 to Creek Company for $7,000 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.
 

Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method.
 

August 1
Purchased merchandise from Aron Company for $5,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
August 5
Sold merchandise to Baird Corporation for $3,500 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $2,000.
August 8
Purchased merchandise from Waters Corporation for $4,000 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.
August 9
Paid $230 cash for shipping charges related to the August 5 sale to Baird Corporation.
August 10
Baird returned merchandise from the August 5 sale that had cost Lowe’s $500 and was sold for $1,000. The merchandise was restored to inventory.
August 12
After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a price reduction from Waters of $400 off the $4,000 of goods purchased. Lowe's debited accounts payable for $400.
August 14
At Aron’s request, Lowe’s paid $410 cash for freight charges on the August 1 purchase, reducing the amount owed (accounts payable) to Aron.
August 15
Received balance due from Baird Corporation for the August 5 sale less the return on August 10.
August 18
Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.
August 19
Sold merchandise to Tux Company for $3,000 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $1,500.
August 22
Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s gave a price reduction (allowance) of $500 to Tux and credited Tux's accounts receivable for that amount.
August 29
Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22.
August 30
Paid Aron Company the amount due from the August 1 purchase.
 

Valley Company’s adjusted account balances from its general ledger on August 31, its fiscal year-end, follows. It categorizes the following accounts as selling expenses: sales salaries expense, rent expense—selling space, store supplies expense, and advertising expense. It categorizes the remaining expenses as general and administrative.
 

Adjusted Account Balances
Debit
Credit
Merchandise inventory (ending)
$ 30,000
 
Other (non-inventory) assets
120,000
 
Total liabilities
 
$ 34,650
Common stock
 
61,267
Retained earnings
 
40,383
Dividends
8,000
 
Sales
 
205,200
Sales discounts
3,140
 
Sales returns and allowances
13,543
 
Cost of goods sold
80,224
 
Sales salaries expense
28,112
 
Rent expense—Selling space
9,644
 
Store supplies expense
2,462
 
Advertising expense
17,442
 
Office salaries expense
25,650
 
Rent expense—Office space
2,462
 
Office supplies expense
821
 
Totals
$ 341,500
$ 341,500
 

Beginning merchandise inventory was $24,210. Supplementary records of merchandising activities for the year ended August 31 reveal the following itemized costs.
 

Invoice cost of merchandise purchases
$ 88,200
Purchases discounts received
1,852
Purchases returns and allowances
4,234
Costs of transportation-in
3,900
Required:

1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

 

Prepare closing entries as of August 31 (the perpetual inventory system is used).

 

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company. Nelson Company uses a perpetual inventory system. It categorizes the following accounts as selling expenses: Depreciation Expense—Store Equipment, Sales Salaries Expense, Rent Expense—Selling Space, Store Supplies Expense, and Advertising Expense. It categorizes the remaining expenses as general and administrative.

 

NELSON COMPANY
Unadjusted Trial Balance
January 31
 
Debit
Credit
Cash
$ 22,350
 
Merchandise inventory
12,000
 
Store supplies
5,700
 
Prepaid insurance
2,300
 
Store equipment
42,900
 
Accumulated depreciation—Store equipment
 
$ 17,600
Accounts payable
 
15,000
Common stock
 
5,000
Retained earnings
 
32,000
Dividends
2,050
 
Sales
 
115,050
Sales discounts
1,900
 
Sales returns and allowances
2,050
 
Cost of goods sold
38,000
 
Depreciation expense—Store equipment
0
 
Sales salaries expense
13,800
 
Office salaries expense
13,800
 
Insurance expense
0
 
Rent expense—Selling space
9,000
 
Rent expense—Office space
9,000
 
Store supplies expense
0
 
Advertising expense
9,800
 
Totals
$ 184,650
$ 184,650
 

Additional Information:

a.   Store supplies still available at fiscal year-end amount to $1,950.

b.   Expired insurance, an administrative expense, is $1,500 for the fiscal year.

c.   Depreciation expense on store equipment, a selling expense, is $1,525 for the fiscal year.

d.   To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,200 of inventory is still available at fiscal year-end.

Required:
1. Using the above information, prepare adjusting journal entries.
2. Prepare a multiple-step income statement for the year ended January 31 that begins with gross sales and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
3. Prepare a single-step income statement for the year ended January 31.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31. (Round your answers to 2 decimal places.)