Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 13

Accounting for Merchandising Operations
Nicole's Getaway Spa (NGS) has been so successful that Nicole has decided to expand her spa by selling merchandise. She sells things such as nail polish, at-home spa kits, cosmetics, and aromatherapy items. Nicole uses a perpetual inventory system and is starting to realize all of the work that is created when inventory is involved in a business. The following transactions were selected from among those completed by NGS in August.

Required :
1. Prepare journal entries for each transaction.
2. Calculate the amount of Net Sales and Cost of Goods Sold for the transactions listed above. What is Nicole's Getaway Spa's gross profit percentage Explain to Nicole what this gross profit percentage means.
3. At the end of August, Nicole noticed that the bank account balance did not equal the company's Cash account balance. Explain to her why these balances do not equal and what related internal control she needs to establish.