Exam 5: Merchandising Operations and the Accounting Cycle

Table 5-4 The following data is for the Atlantis Merchandising, which uses a periodic inventory system: Sales revenue \ 600,000 Interest revenue 12,000 Freight in 42,000 Beginning inventory 77,000 Purchase discounts 19,000 Sales reburns and allowances 33,000 Operating expenses 77,000 Interest expense 9,000 Ending inventory 81,000 Purchases 415,000 Sales discounts 35,000 Omar Atlantis, Withdrawals 71,000 Purchase returns and allowances 39,000 -Refer to Table 5-4. The total cost of goods available for sale for the Atlantis Merchandising is:

Purchases of inventory minus purchase discounts and minus purchase returns and allowances equals:

Table 5-10 The December 31, 2019 adjusted trial balance for Camptown Company is shown below. Debit Credit Cash \ 12,600 Accounts receivable 2,400 Prepaid rent 800 Inventory 28,000 Accounts payable \ 4,200 Salary payable 1,000 Notes payable 800 Capital 13,800 Drawing 1,000 Sales revenue 96,000 Sales returns and allowances 1,600 Sales discounts 400 Cost of goods sold 25,000 Salary expense 21,000 Rent expense 22,500 Supplies expense 500 Total \ 115,800 \ 115,800 -Using the information from Table 5-10 prepare an income statement in single-step format and the closing entries for Camptown Company.

When a discount is taken for prompt payment under a perpetual inventory system, the purchaser would credit:

Table 5-3 Sales revenue \ 750,000 Interest revenue 18,000 Freight in 44,000 Beginning inventory 75,000 Purchases discounts 20,000 Sales reburns and allowances 44,000 Operating expenses 99,000 Interest expense 15,000 Ending inventory 72,000 Purchases 415,000 Sales discounts 25,000 William Browning, Withdrawals 61,000 Purchase returns and allowances 36,000 -Refer to Table 5-3. Operating income is:

A purchase return or allowance under a periodic inventory system is credited to:

An adjusted trial balance is shown below. Debit Credit Cash \ 12,600 Accounts receivable 2,400 Prepaid rent 800 Inventory 28,000 Accounts payable \ 4,200 Salary payable 1,000 Notes payable 800 Capital 13,800 Withdrawals 1,000 Sales revenue 96,000 Sales reburns and allowances 1,600 Sales discounts 400 Cost of goods sold 25,000 Salary expense 21,000 Rent expense 14,000 Amortization expense 8,500 Supplies expense 500 Total \ 115,800 \ 115,800 What will the final balance in Capital be after the closing entries?

Underwater Adventures has the following account balances on August 31, 2019: Accounts payable \ 8,800 Accounts receivable 9,600 Accumulated amortization - equipment 30,300 Cash 2,200 Cost of goods sold 341,500 Jacobson, capital 190,700 Jacobson, withdrawals 44,000 Equipment 88,000 Interest earned 2,000 Inventory 71,500 Operating expenses 175,500 Sales discounts 3,100 Sales retarns and allowances 14,400 Sales revenue 520,600 Supplies 7,100 Unearned sales revenue 4,500 The following information as at August 31, 2019 was also available: a. A physical count of items showed $1,200 of supplies on hand. b. An inventory count showed inventory on hand of $66,400. c. The equipment has an estimated useful life of eight years and is expected to have no salvage value. d. Unearned sales revenue of $1,000 was earned. Required: 1. Prepare the necessary adjusting journal entries at August 31, 2019. For simplicity all operating expenses are combined into a single operating expense account for financial statement purposes. Use the normal account name for the adjusting journal entries. 2. Prepare a classified balance sheet based on adjusted account balances.

There is no such thing as too high an inventory turnover ratio.

In a periodic inventory system, beginning inventory plus net purchases minus freight in equals cost of goods sold.

Table 5-5 The following items were taken from the December 31, 2019, records of Speedy Boat Company, which uses a periodic inventory system: Salary payable \ 1,100 Sales revenue 480,000 Interest revenue 3,000 Freight in 20,000 Beginning inventory 35,000 Sales discounts 18,000 Purchases of inventory 240,000 Purchase retarns and allowances 35,000 Purchase discounts 10,000 Sales returns and allowances 35,000 Ending inventory 80,000 Operating expenses 85,000 Interest expense 7,000 Owner withdrawals 12,000 -Based on the information in Table 5-5, provide the following: 1. Multi-step income statement 2. Gross margin percentage and the inventory turnover ratio for Speedy Boat Company. Comment on the effect that an increasing inventory turnover has on a business.

What is the difference between a sales return and a sales allowance?

Table 5-10 The December 31, 2019 adjusted trial balance for Camptown Company is shown below. Debit Credit Cash \ 12,600 Accounts receivable 2,400 Prepaid rent 800 Inventory 28,000 Accounts payable \ 4,200 Salary payable 1,000 Notes payable 800 Capital 13,800 Drawing 1,000 Sales revenue 96,000 Sales reburns and allowances 1,600 Sales discounts 400 Cost of goods sold 25,000 Salary expense 21,000 Rent expense 22,500 Supplies expense 500 Total \ 115,800 \ 115,800 -Using the information from Table 5-10 prepare an income statement in single-step format and the closing entries for Camptown Company.

The adjusting entry required when the inventory counted is greater than the balance in the inventory account has a credit to Cost of Goods Sold.

Below is an adjusted trial balance from Husky Iron Works located in Huntsville, Ontario. 1. Prepare closing entries for Husky Iron Works using the adjusted trial balance. 2. Prepare an income statement, statement of owner's equity and a classified balance sheet for the December 31, 2019 year-end. There were no owner investments during the year. 3. Calculate the gross margin percentage and the inventory turnover ratio at December 31, 2019. The inventory at the beginning of the year was $320,000.

Table 5-2 Sales revenue \ 382,000 Net sales revenue \ 360,000 Gross margin 255,000 Operating expenses 132,000 Interest expense 30,000 Interest revenue 60,000 -Referring to Table 5-2, what is the net income or net loss?

In a periodic inventory system, the cost of freight-in is part of the cost of goods available for sale.

Table 5-4 The following data is for the Atlantis Merchandising, which uses a periodic inventory system: Sales revenue \ 600,000 Interest revenue 12,000 Freight in 42,000 Beginning inventory 77,000 Purchase discounts 19,000 Sales reburns and allowances 33,000 Operating expenses 77,000 Interest expense 9,000 Ending inventory 81,000 Purchases 415,000 Sales discounts 35,000 Omar Atlantis, Withdrawals 71,000 Purchase returns and allowances 39,000 -Refer to Table 5-4. The cost of goods sold for Atlantis Merchandising is:

Table 5-4 The following data is for the Atlantis Merchandising, which uses a periodic inventory system: Sales revenue \ 600,000 Interest revenue 12,000 Freight in 42,000 Beginning inventory 77,000 Purchase discounts 19,000 Sales reburns and allowances 33,000 Operating expenses 77,000 Interest expense 9,000 Ending inventory 81,000 Purchases 415,000 Sales discounts 35,000 Omar Atlantis, Withdrawals 71,000 Purchase returns and allowances 39,000 -Refer to Table 5-4. The net income for Atlantis Merchandising is:

Operating expenses are divided into manufacturing expenses and selling expenses on the income statement.