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Chapter 5: Q5-12RQ (page 294)
How is the net cost of inventory calculated?
The net cost of inventory includes the beginning inventory, the purchases made during the year, and the closing inventory.
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Journalize the following transactions that occurred in September 2018 for Aquamarines. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Aquamarines estimates sales returns at the end of each month.
Sep. 3 Purchased merchandise inventory on account from Sharpner Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.
4 Paid freight bill of \)85 on September 3 purchase.
4 Purchased merchandise inventory for cash of \(1,600.
6 Returned \)1,300 of inventory from the September 3 purchase.
8 Sold merchandise inventory to Herman Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,565.
9 Purchased merchandise inventory on account from Tucker Wholesalers, \(6,000. Terms 3/10, n/30, FOB destination.
10 Made payment to Sharpner Wholesalers for goods purchased on September 3, less return and discount.
12 Received payment from Herman Company, less discount.
13 After negotiations, I received a \)500 allowance from Tucker Wholesalers.
15 Sold merchandise inventory to Jerome Company, \(2,800, on account. Terms n/EOM. Cost of goods, \)1,200.
22 Made payment, less allowance, to Tucker Wholesalers for goods purchased on September 9.
23 Jerome Company returned \(200 of the merchandise sold on September 15. Cost of goods, \)80.
25 Sold merchandise inventory to Small for \(1,800 on account that cost \)738. Terms of 3/10, n/30 was offered, FOB shipping point. As a courtesy to Small, $40 of freight was added to the invoice, for which Aquamarines paid cash.
29 Received payment from Small, less discount.
30 Received payment from Jerome Company, less return.
Match the accounting terminology to the definitions.
1. Cost of Goods Sold | a. An inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand. |
2. Perpetual inventory system | b. Expenses, other than the Cost of Goods Sold, that are incurred in the entity鈥檚 major ongoing operations. |
3. Vendor | c. Excess of Net Sales Revenue over Cost of Goods Sold. |
4. Periodic inventory system | d. The cost of merchandise inventory that the business has sold to customers. |
5. Operating expenses | e. The individual or business from whom a company purchases goods. |
6. Gross profit | f. An inventory system that keeps a running computerized record of merchandise inventory. |
Journalize the following sales transactions for Salem Sportswear. Explanations are not required. The company estimates sales returns at the end of each month.
Jul. 1 Salem sold \(20,000 of men鈥檚 sportswear for cash. Cost of goods sold is \)10,000.
3 Salem sold \(62,000 of women鈥檚 sportswear on account, credit terms are 3/10, n/30. Cost of goods is \)31,000.
5 Salem received a \(4,500 sales return on damaged goods from the customer on July 1. Cost of goods damaged is \)2,250.
10 Salem receives payment from the customer on the amount due, less discount.
Journalize the following sales transactions for Sanborn Camera Store using the periodic inventory system. Explanations are not required.
Dec. 3, Sanborn sold $41,900 of camera equipment on the account; credit terms are 3/15, n/EOM.
17 Sanborn receives payment from the customer on the amount due to less the discount.
Clink Electric uses the periodic inventory system. Clink reported the following selected amounts at May 31, 2018:
Merchandise Inventory, June 1, 2017 \( 16,000 Freight In \) 6,000
Merchandise Inventory, May 31, 2018 21,500 Net Sales Revenue 138,000
Purchases 81,000 Common Stock 32,000
Purchase Discounts 3,000 Retained Earnings 17,000
Purchase Returns and Allowances 6,600
Compute the following for Clink:
a. Cost of goods sold.
b. Gross profit.
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