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Chapter 5: Q5-14RQ (page 294)
Under the new revenue recognition standard, how is the sale of inventory recorded?
The sale of inventory is recorded at the net price under the newrevenue recognition standard.
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When a company has a contract involving multiple performance obligations, how must the company recognize revenue?
Camilia Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:
Cash \( 2,900 Cost of Goods Sold \) 18,700
Selling Expenses 1,400 Equipment, net 9,500
Accounts Payable 4,300 Accrued Liabilities 1,800
Common Stock 4,365 Net Sales Revenue 29,200
Notes Payable, long-term 500 Accounts Receivable 3,200
Merchandise Inventory 1,100 Interest Expense 65
Administrative Expenses 3,300
Requirements
1. Prepare Camilia Communication鈥檚 statement of retained earnings for the year ended July 31, 2018. Assume that there were no dividends declared during the year and that the business began on August 1, 2017.
2. Prepare Camilia Communication鈥檚 classified balance sheet at July 31, 2018. Use the report format.
Rocky RV Center鈥檚 accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold \( 372,000 Accumulated Depreciation鈥擝uilding \) 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense鈥擝uilding 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
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.
Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Explain.
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