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Chapter 5: Q31E (page 304)

Journalize the following transactions for Master Bicycles using the periodic inventory system. Explanations are not required.

Nov. 2 Purchased \(3,400 of merchandise inventory under terms 2/10, n/EOM, and FOB shipping point.

6 Returned \)800 of defective merchandise purchased on November 2.

8 Paid freight bill of \(100 on November 2 purchase.

10 Sold merchandise inventory on account for \)6,100. Payment terms were 3/15, n/45.

11 Paid amount owed on credit purchase of November 2, less the return and the discount.

22 Received cash from November 10 customer in full settlement of their debt, less the discount.

Short Answer

Expert verified

The total of debits and credits is$19,100.

Step by step solution

01

Meaning of Merchandise Inventory

In accounting, merchandise inventory indicates the goods or products stocked/held by a business concern to resale and generate revenues. An inventory consists of various stages such asraw material, work-in-progress, and finished goods.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Nov 2

Purchases

3,400

Accounts payable

3,400

Nov 6

Accounts payable

800

Purchase returns

800

Nov 8

Freight-in

100

Cash

100

Nov 10

Accounts receivable

6,100

Sales

6,100

Nov 11

Accounts payable (3400-800)

2,600

Purchase discount (2600*2%)

52

Cash

2,548

Nov 22

Cash

5,917

Sales discount (6100*3%)

183

Accounts receivable

6,100

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Most popular questions from this chapter

When a company has a contract involving multiple performance obligations, how must the company recognize revenue?

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?

Crazy Cookies earned net sales revenue of \(66,000,000 in 2018. The cost of goods sold was \)39,600,000, and net income reached $7,000,000, the company鈥檚 highest ever. Compute the company鈥檚 gross profit percentage for 2018.

Triton Department Store uses a periodic inventory system. The adjusted trial balance of Triton Department Store at December 31, 2018, follows:

TRITON DEPARTMENT STORE

Adjusted Trial Balance

December 31, 2018

Balance

Account Title Debit Credit

Cash \(8,200

Accounts Receivable 84,600

Merchandise Inventory (beginning) 37,800

Office Supplies 850

Furniture 86,000

Accumulated Depreciation-Furniture \)18,500

Accounts Payable 29,400

Salaries Payable 2,300

Unearned Revenue 14,900

Notes Payable, long-term 36,000

Common Stock 60,000

Retained Earnings 22,850

Dividends 88,600

Sales Revenue 374,000

Purchases 295,000

Purchase Returns and Allowances 109,000

Purchase Discounts 6,400

Freight-In 300

Selling Expense 41,700

Administrative Expense 26,600

Interest Expense 3,700

Total \(673,350 \)673,350

Requirements

1. Prepare Triton Department Store鈥檚 multi-step income statement for the year ended December 31, 2018. Assume ending Merchandise Inventory is $36,300.

2. Journalize Triton Department Store鈥檚 closing entries.

Journalize the following sales transactions for Paul Sportswear. Explanations are not required.

Aug. 1 Paul sold \(66,000 of women鈥檚 sportswear on account, credit terms are 2/10, n/30. Cost of goods is \)33,000. Paul uses the gross method to record sales revenue.

25 Paul receives payment from the customer on the amount due.
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