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Chapter 5: 2SE (page 325)

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

Short Answer

Expert verified

The total of debits and credits is$50,000.

Step by step solution

01

Meaning of Discount

In accounting, a discount denotes thereduction in the price of the goods or services purchased or sold by a business concern. Discount is bifurcated into two categories for identifying the revenue or expense, i.e.,sales discount and purchase discount.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Jun 5

Accounts receivable

20,000

Sales revenue

20,000

Jun 5

Cost of goods sold

10,000

Merchandise inventory

10,000

Jun 12

Cash

19,200

Sales discount (20000*4%)

800

Accounts receivable

20,000

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Most popular questions from this chapter

Party-Time T-Shirts sells T-shirts for parties at the local college. The company completed the first year of operations, and the shareholders are generally pleased with operating results as shown by the following income statement:

PARTY-TIME T-SHIRTS

Income Statement

Year Ended December 31, 2017

Net Sales Revenue \(350,000

Cost of Goods Sold 210,000

Gross Profit 140,000

Operating Expenses:

Selling Expense 40,000

Administrative Expense 25,000

Net Income \)75,000

Bill Hildebrand, the controller, is considering how to expand the business. He proposes two ways to increase profits to \(100,000 during 2018.

a. Hildebrand believes he should advertise more heavily. He believes additional advertising costing \)20,000 will increase net sales by 30% and leave administrative expense unchanged. Assume that Cost of Goods Sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, Cost of Goods Sold will increase proportionately.

b. Hildebrand proposes selling higher-margin merchandise, such as party dresses, in addition to the existing product line. An importer can supply a minimum of 1,000 dresses for \(40 each; Party-Time can mark these dresses up 100% and sell them for \)80. Hildebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. Party-Time can expect to sell only 80% of these dresses during the coming year.

Help Hildebrand determine which plan to pursue. Prepare a multi-step income statement for 2018 to show the expected net income under each plan.

Emerson St. Book Shop鈥檚 unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.

Requirements

1. Journalize the adjustment for inventory shrinkage.

2. Journalize the adjustment for estimated sales returns.

On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, \(12,000, that cost \)4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.

Requirements

1. Journalize Tarin Wholesaler鈥檚 November transactions.

2. Journalize Cain Company鈥檚 November transactions.

The records of Farm Quality Steak Company list the following selected accounts for the quarter ended April 30, 2018:

Interest Revenue \( 400 Accounts Payable \) 17,700

Merchandise Inventory 45,000 Accounts Receivable 38,200

Notes Payable, long-term 54,000 Accumulated Depreciation鈥擡quipment 37,700

Salaries Payable 2,800 Common Stock 30,000

Net Sales Revenue 298,000 Retained Earnings 5,380

Rent Expense (Selling) 15,100 Dividends 25,000

Salaries Expense (Administrative) 2,000 Cash 7,100

Office Supplies 6,500 Cost of Goods Sold 154,960

Unearned Revenue 13,100 Equipment 132,000

Interest Expense 2,100 Interest Payable 1,700

Depreciation Expense鈥擡quipment (Administrative) 1,320

Rent Expense (Administrative) 7,100

Utilities Expense (Administrative) 4,600 Salaries Expense (Selling) 6,000

Delivery Expense (Selling) 3,800 Utilities Expense (Selling) 10,000

Requirements

1. Prepare a single-step income statement.

2. Prepare a multi-step income statement.

3. M. Doherty, manager of the company, strives to earn a gross profit percentage of at least 50%. Did Farm Quality achieve this goal? Show your calculations

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:
See all solutions

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