Ch05 Solutions, Accounting Principles, 11th Edition

CHAPTER 5  Ac  A c c o u n t i n g f o r Merc Mer c h and an d i s i n g Oper Op erat atii o n s  ASSIGNMENT CLASSIFICA CL ASSIFICATION TION TABLE TAB LE Learning Objectives Objectives

Questions Questions

Brief Exercises

*1.

Identify the differences between service and merchandising companies.

2, 3, 4

1

*2.

Explain the recording of purchases under a perpetual inventory system.

5, 6, 7, 8

2, 4

1

2, 3, 4, 11

1A, 2A, 4A

1B, 2B, 4B

*3.

Explain the recording of sales revenues under a perpetual inventory system.

9, 10, 11

2, 3

2

3, 4, 5, 11

1A, 2A, 4A

1B, 2B, 4B

*4.

Explain the steps in the accounting cycle for a merchandising company.

1, 12, 13, 14

5, 6

3

6, 7, 8

3A, 4A, 5A

3B, 4B

*5.

Distinguish between a multiple-step and a singlestep income statement.

15, 16, 17, 18, 19, 20

7, 8, 9

4

6, 9, 10, 12, 13, 14

2A, 3A, 5A 6A, 7A

2B, 3B 5B, 6B

*6.

Prepare a worksheet for a merchandising company

21

10

15, 16

5A

*7.

Explain the recording of purchases and sales of inventory under a periodic inventory system.

22, 23

11, 12, 13, 14, 15

17, 18, 19, 20, 21, 22

6A, 7A, 8A

Do It!

Exercises

 A Problems

B Problems

1

5B, 6B, 7B

*Note:  Note:   All asterisked  asterisked  Questions, Exercises, and Problems relate to material contained in the appendices to the chapter.

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only) 

5-1

 ASSIGNMENT  A SSIGNMENT CHARACTERISTICS CHARA CTERISTICS TABLE TAB LE Problem Number

Description

Difficulty Level

Time  Al lo tt ed (m in .)

1A

Journalize purchase and sales transactions under a perpetual inventory system.

Simple

20–30

2A

Journalize, post, and prepare a partial income statement.

Simple

30–40

3A

Prepare financial statements and adjusting and closing entries.

Modera Moderate te

40–50 40–50

4A

Journalize, post, and prepare a trial balance.

Simple

30–40

*5A

Complete accounting cycle beginning with a worksheet.

Moderate

50–60

*6A

Determine cost of goods sold and gross profit under periodic approach.

Modera Moderate te

40–50 40–50

*7A

Calculate missing amounts and assess profitability.

Moderate

20–30

*8A

Journalize, post, and prepare trial balance and partial income statement using periodic approach.

Simple

30–40

1B

Journalize purchase and sales transactions under a perpetual inventory system.

Simple

20–30

2B

Journalize, post, and prepare a partial income statement.

Simple

30–40

3B

Prepare financial statements and adjusting and closing entries.

Modera Moderate te

40–50 40–50

4B

Journalize, post, and prepare a trial balance.

Simple

30–40

*5B

Determine cost of goods sold and gross profit under periodic approach.

Modera Moderate te

40–50 40–50

*6B

Calculate missing amounts and assess profitability.

Moderate

20–30

*7B

Journalize, post, and prepare trial balance and partial income statement using periodic approach.

Simple

30–40

5-2

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

WEYGANDT ACCOUNTING PRINCIPLES 11E CHAPTER 5  ACCOUNTING FOR MERCHANDISING OPERATIONS Number

LO

BT

Difficul ty

Time Time (min.)

BE1

1

AP

Simple

4–6

BE2

2, 3

AP

Simple

2–4

BE3

3

AP

Simple

6–8

BE4

2

AP

Simple

6–8

BE5

4

AP

Simple

1–2

BE6

4

AP

Simple

2–4

BE7

5

AP

Simple

2–4

BE8

5

C

Simple

4–6

BE9

5

AP

Simple

4–6

BE10

6

K

Simple

2–4

BE11

7

AP

Simple

4–6

BE12

7

AP

Simple

4–6

BE13

7

AP

Simple

3–5

BE14

7

AP

Simple

6–8

BE15

7

AP

Simple

4–6

DI1

2

AP

Simple

2–4

DI2

3

AP

Simple

4–6

DI3

4

AP

Simple

4–6

DI4

5

AP

Simple

10–12

EX1

1

C

Simple

3–5

EX2

2

AP

Simple

8–10

EX3

2, 3

AP

Simple

8–10

EX4

2, 3

AP

Simple

8–10

EX5

3

AP

Simple

8–10

EX6

4, 5

AP

Simple

6–8

EX7

4

AP

Simple

6–8

EX8

4

AP

Simple

8–10

EX9

5

AP

Simple

8–10

EX10

5

AP

Simple

8–10

EX11

2, 3

AN

Moderate

6–8

EX12

5

AP

Simple

8–10

EX13

5

AN

Simple

6–8

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only) 

5-3

 ACCOUNTING  A CCOUNTING FOR MERCHANDISING OPERATIONS (Con t inued in ued)) Number

LO

BT

Difficul ty

Time (min.)

EX14

5

AN

Moderate

8–10

EX15

6

AP

Simple

2–4

EX16

6

AP

Simple

8–10

EX17

7

AP

Simple

6–8

EX18

7

AP

Simple

8–10

EX19

7

AN

Moderate

10–12

EX20

7

AP

Simple

8–10

EX21

7

AP

Simple

8–10

EX22

7

AP

Simple

6–8

P1A

2, 3

AP

Simple

20–30

P2A

2, 3, 5

AP

Simple

30–40

P3A

4, 5

AN

Moderate

40–50

P4A

2–4

AP

Simple

30–40

P5A

4–6

AP

Moderate

50–60

P6A

5, 7

AP

Moderate

40–50

P7A

5, 7

AN

Moderate

20–30

P8A

7

AP

Simple

30–40

P1B

2, 3

AP

Simple

20–30

P2B

2, 3, 5

AP

Simple

30–40

P3B

4, 5

AN

Moderate

40–50

P4B

2–4

AP

Simple

30–40

P5B

5, 7

AP

Moderate

40–50

P6B

5, 7

AN

Moderate

20–30

P7B

7

AP

Simple

30–40

BYP1

5

AN, E

Simple

10–15

BYP2

5

AN, E

Simple

15–20

BYP3

5

AN, E

Simple

15–20

BYP4

—

AP

Simple

10–15

BYP5

5

AN, S, E

Moderate

20–30

BYP6

3

C

Simple

10–15

BYP7

2

E

Simple

10–15

BYP8

—

E

Simple

5–10

BYP9

—

AP

Moderate

10–15

5-4

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

BLOOM BL OOM’S ’S TAXONOMY TAXONOMY TABLE TAB LE

  s   m   e    l    b   o   r    P    d   n   a   s   e   s    i   c   r   e   x    E   r   e    t   p   a    h    C      f   o      d   n    E    d   n   a   s   e   v    i    t   c   e    j    b    O   g   n    i   n   r   a   e    L  ,   y   m   o   n   o   x   a    T   s    ’   m   o   o    l    B   n   e   e   w    t   e    b    t   r   a    h    C   n   o    i    t   a    l   e   r   r   o    C

  s   s   s   o    i   s   g   r   c   y   n   A    l   n   a   i   o    t   g   n   r   n   i    t   o    i    A   a   u   e   p   k   i   z   o   v   e   a   n   e    Y   i    R   s    M    t    t    l   n   a   a   a   g   u   r    i   a   r    C   o   a   o   O  s    b   p   c   i   s   e   i   c    A  m  n   a   i   c   h   h    l   n    l   o   i   e   t    t    A   C   F   D    E

  n   o    i    t   a   u    l   a   v    E

  s    i   s   e    h    t   n   y    S

  s    i   s   y    l   a   n    A

  n   o    i    t   a   c    i    l   p   p    A

  n   o    i   s   n   e    h   e   r   p   m   o    C   e   g    d   e    l   w   o   n    K

   1    1      5    E    B   A   B    2   -    4     -    4    5   5   5    P   P   P

   3   -    4      5   5    Q   Q

   A   B    3   -    3      5   5    P   P    A   B    5     -    4    5   5    P   P

   3   4   A   B    1   -    1   -    3   -    3      5   5   5   5    E   E   P   P

   5   6    1   -    1      5   5    E   E

   8   A   B    1   -    7   -    6      5   5   5    E   P   P    A   A   B   B    6   -    8   -    5   -    7      5   5   5   5    P   P   P   P    5    1    1   2   -    9   0    5   1   -    2   -    2   -    2      E   5    5   5   5    B   E   E   E   E    1   2   3   4    3   1   -    1   -    1   -    1      2   -    5   5   5   5    5   E   E   E   E    Q   B   B   B   B

   8    1      5    Q

   0    1   1      2   -    5    5   E    Q   B

   2    2      5    Q

    e    l   g   t  .   n   n   a   i   s   e   n   e   a   m   e   d   t   e   w   a    t   n    t   a   e   s    b   p   e   e    h   t   m   s     s   o    i   u   l   e   c   g   p   i   n   n    i    i    t   p    t    l   s   u   t   e    i    D  m  s  .    5

 .  .   r   m   y   e   e    d   t   r   n   a    f   n   s   o   o   p   u   y    f    t   m   g   s   s   n   e   y   e   o    i   r   e   c    d   l   o    h   g   r   a   s   n   o   s   t    k   c   n   e   r    i   e   d   s   r   n   v   o   i   a   n   w   d   e   s   i    h   c   a   n    i   a    t   e   s   d   e   h   n   r   a   c    i    h   i   o   a   r   a   c   r   p   e    l   p   r   e   m   x   u   e   p   r    P  a    E  p   a  .  .    6    7    *    *

   A    5      5    P

   6   0    A   A   A   B   B   5    5   -    1   -    2     -    6   -    1   -    6   -    7   -    5    5   5   5   5   5   5   5   5    P   P   P   P   P   Q   Q   Q    1    2    7    1   2    3   5    2   A   -    4   -    1   -    3   -    2   -    6   -    3   -    9   -    1   -   -    6   9   0    8    1    1   -    2   -    3   -    5    1    1   -    5   5   5   -    5   5   5   -    5   5   5    5   5   4             -    2      5    5   E   E   I    5    5   E   E   I    5    5   E   E   I    E   E   E   I    5   5   5   5    5    Q   B   B   D   E    Q   B   B   D   E    Q   B   B   D    B   B   B   D   E   E   E   E   P

   A   A   B    3     -    4   -    1   -    2   -    1    5   5   5   5   5    E   E   P   P   P    1      5    E    B    1      5    E

   1    9   -    1      5   5    Q   E    B   B   B    1   -    2   -    4      5   5   5    P   P   P    A   A   A    4   -    5   -    1   -    2   -    4      5   5   5   5   5    E   E   P   P   P

   2   4    1   -    1   -    1      5   5   5    Q   Q   Q

   6   -    7      5   5    Q   Q

   2      5    Q

   5      5    Q    l   a  .   u   s    t   e    i    f   e   p   s   n   r   a   o   e   e   e   g   v   p   c    i    d   n   p    t    i   n   n   m   c   e   a   o    d   a  .   e   r   r    j   m   e   e   c   o   r   e   e    b    f   c   c   d   t    f   g    i   n   e    O    i   s   v   i   r   n   r   g    d   s   e   u   y   e   i   e   s   n   s    i    t   s    h   y   n    h   n   d   n    t   e   r   s   r   y   e   a    i   n   a   t   o   a    i   e    f   e   h   a   h   n   c    l   c    L    t   w  r   n   t   r   e   v   e   e   e   p   x   u   n    d   b   m    E    I   p   i  .  .    1    2

Copyright © 2013 John Wiley & Sons, Inc.

   A    6   -    7   -    8   -    4      5   5   5   5    E   E   E   P

   0    1      5    Q  .   m   e    f    t   o   a   s   y   g   r   e   s   n   y    i    d   r    d   r   n   o   u    t   o   s   n   c   e   e   e   v   r   u   n   e   n    i    h   e    t   v   l   a   e   u   n   r    i    t   a   s   e    l   e   p   p   l   x   a   r   e    E  s   p  .    3

 .   y   e   n    h   a   a    t   r   p   n   f   o   m    i   o   s   l   c   p   e   c   g   e    t   y   n   s   c   i   s   e   g   i    h   i   n   d    t    t   n   n   n   a    i    h   a    l   u   c   r   p   o   c   x   c   e    E  a   m  .    4

   9   8   -    7    1   -    5   1      5   E   5    Q   B   Q

Weygandt, Accounting Principles, 11/e 11/e,, Solu Solutio tions ns Manu Manual al

  g   n   n    i    k   e   i   o   a   h   t   a    M   t   z    i   n   s   s   n   o   o    i   a   s   r   r   g    i   c   c   e   A   O    D   s   s   s   o    i   r   s   c   g   l   y   A   n   n   a    i    t   o    i   r   n   g   n   t   o   A   i   a   p   e   k   i   z   e   v   a   n    R   i    M  a    l    t   a   n   r   g   a   r    i   o   O   a   c   p   i   s   e   n    i   a   m  c   h   n    i   o   e   t    F   C   D

  s   n   o   u   i   c   t   o   a   c    F   i    f    i    d    l   r    d   o   o   C    W   -    B    l   a   S   e   A    R   F   n   o    i    t   a   c    i   n   u   m   m   o    C

  e   v    i    t   c   e   p   s   r   e    P   r   u   o    Y   g   n    i   n   e    d   a   o   r    B

(For (For Inst Instru ruct ctor or Use Use Only Only))

5-5

 ANSWERS  A NSWERS TO QUESTIONS 1.

(a)

2.

The normal operating cycle for a merchandising company is likely to be longer than in a service company because inventory must first be purchased and sold, and then the receivables must be collected.

3.

(a) The components of revenues and expenses differ as follows:

Disagree. The steps in the accounting cycle are the same for both a merchandising company and a service company. (b) The measurement of income is conceptually conceptually the same. In both types of companies, net income (or loss) results from the matching of expenses with revenues.

Revenues Expenses

Merchandising Sales Revenue Cost of Goods Sold and Operating

Service Fees, Rents, etc. Operating (only)

(b) The income measurement process is as follows: Sales Revenue

Less

Cost of Goods Sold

Equals

Gross Profit

Less

Operating Expenses

Equals

Net Income

4.

Income measurement measurement for a merchandising company differs from a service company company as follows: (a) sales are the primary source of revenue and (b) expenses are divided into two main categories: cost of goods sold and operating expenses.

5.

In a perpetual inventory inventory system, system, cost of goods sold is determined each time time a sale occurs. occurs.

6.

The letters FOB mean Free on Board. FOB shipping point means that goods are placed free on board the carrier by the seller. The buyer then pays the freight and debits Inventory. FOB destination means that the goods are placed free on board to the buyer’s place of business. Thus, the seller pays the freight and debits Freight-out.

7.

Credit terms of 2/10, n/30 mean that a 2% cash discount may be taken if payment is made within 10 days of the invoice date; otherwise, the invoice price, less any returns, is due 30 days from the invoice date.

8.

July 24

Accounts Payable ($2,000 – $200) ........................... ......................................... ...................... ........ Inventory ($1,800 X 2%) .......................... ........................................ ............................ ................. ... Cash ($1,800 – $36) ........................... ......................................... ............................ ...................... ........

1,800 36 1,764

9.

Agree. In accordance with the the revenue recognition principle, principle, sales sales revenues revenues are generally conconsidered to be recognized when the goods are transferred from the seller to the buyer; that is, when the exchange transaction occurs. The recognition of revenue is not dependent on the collection of credit sales.

10.

(a) The primary source documents are: (1) cash sales—cash register tapes and (2) credit sales— sales invoice.

5-6

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

Questions Chapter 5 (Continued) 5 (Continued) (b) The entries are: Debit Cash sales—

Credit sales—

11.

July 19

Cash ........................... ......................................... ............................ ...................... ........ Sales Revenue ..................................... ....................................... .. Cost of Goods Sold ........................ ...................................... ................ .. Inventory........................... ......................................... ...................... ........

XX

Accounts Receivable ........................... ...................................... ........... Sales Revenue ..................................... ....................................... .. Cost of Goods Sold ........................ ...................................... ................ .. Inventory........................... ......................................... ...................... ........

XX

Credit XX

XX XX

XX XX XX

Cash ($800 – $16)............................ $16).......................................... ............................ ....................... ......... Sales Discounts ($800 X 2%)................................................ 2%) ................................................  Accounts Receivable ($900 – $100) ................. ............................. ............

784 16 800

12.

The perpetual inventory records for merchandise merchandise inventory may be incorrect due to a variety of causes such as recording errors, theft, or waste.

13.

Two closing entries are required: (1) Sales Revenue ............................ ......................................... ........................... ............................ ........................ .......... Income Summary ........................... ........................................ ........................... ........................... .............

200,000

(2) Income Summary ............................ .......................................... ............................ ............................ ................... ..... Cost of Goods Sold ............................ .......................................... ............................ ...................... ........

145,000

200,000

145,000

14.

Of the merchandising accounts, accounts, only Inventory will appear in the post-closing trial balance.

15.

Sales revenues.......................... revenues........................................ ............................ ............................ ........................... ........................... ....................... ......... Cost of goods sold......................... sold....................................... ............................ ............................. ............................. ............................ ................. ... Gross profit ............................ .......................................... ........................... ........................... ............................ ............................ ........................... .............

$105,000 70,000 $ 35,000

Gross profit rate: $35,000 ÷ $105,000 = 33.3% 16.

Gross profit ............................ .......................................... ........................... ........................... ............................ ............................ ........................... ............. Less: Net income........................... ......................................... ............................ ........................... ........................... ............................ .................. .... Operating expenses ........................... ......................................... ............................ ............................ ........................... ........................... ..............

17.

There are three distinguishing features in the income statement statement of a merchandising company: (1) a sales revenues section, (2) a cost of goods sold section, and (3) gross profit.

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Weygandt, Accounting Principles, 11/e, Solutions Manual

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5-7

Questions Chapter 5 (Continued) 5 (Continued) *18.

(a) The operating activities part of the income statement has three sections: sales revenues, cost of goods sold, and operating op erating expenses. (b) The nonoperating activities part consists of two sections: sections: other revenues and gains, and other expenses and losses.

*19.

The single-step income statement differs from the multiple-step income statement in that: (1) all data are classified into two categories: revenues and expenses, and (2) only one step, subtracting total expenses from total revenues, is required in determining net income (or net loss).

20.

Apple’s gross profit rate for 2011 was 40.5% [($108,249 – $64,431) ÷ $108,249]. Its gross profit rate in 2010 was 39.4% [($65,225 – $39,541) ÷ $65,225] so the rate increased from 2010 to 2011.

*21.

The columns are: (a) Inventory—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Balance Sheet (Dr.). (b) Cost of Goods Sold—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Income Statement (Dr.).

*22.

*23.

5-8

 Accounts

Added/Deducted

Purchase Returns and Allowances Purchase Discounts Freight-in

Deducted Deducted  Added

July 24

Accounts Payable ($3,000 – $200) ........................... ......................................... .......................... ............ Purchase Discounts ($2,800 X 2%) ............................. ............................................ ............... Cash ($2,800 – $56) ........................... ......................................... ............................ .......................... ............

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SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-1 (a) Cost Cos t of goods goo ds sold so ld = $45,000 $45,000 ($75,000 ($75,000 – $30,000) $30,000).. Operatin Operat ing g expens exp enses es = $19,200 ($30, ($30,000 000 – $10,80 $10,800). 0). (b) Gross Gro ss pr ofit of it = $38,000 $38,000 ($108,00 ($108,000 0 – $70,000) $70,000).. Operatin Operat ing g expen ex penses ses = $8,500 $8,500 ($38,0 ($38,000 00 – $29,50 $29,500). 0). (c) Sales Revenue Reven ue = $163,500 ($83,900 + $79,600). Net income = $40,100 ($79,600 – $39,500).

BRIEF EXERCISE 5-2 Radomir Radomir Company Company Invent Inv entor ory y ................................................ ............................................................... ...............  Ac coun co untt s Payabl Pay able e ........................................ ........................................

780 780

Lemke Company  Ac coun co untt s Receiv Rec eiv able abl e........................................... ........................................... Sales Revenue Reven ue .............................................. .............................................. Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ..... Invent Inv entor ory y ............................................ ....................................................... ...........

780 780 470 470

BRIEF EXERCISE 5-3 (a) Acco Ac coun unts ts Receiv able abl e.......... ............... .......... .......... .......... .......... .......... ........ ... Sales Revenue Reven ue ............................................ .............................................. .. Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ..... Invent Inv entor ory y .......................................... ....................................................... .............

900,000 900,000

(b) Sales Return Retu rns s and Allo Al lowan wances ces .......... ............... .......... .......... ....... ..  Ac coun co untt s Receiv Rec eiv able abl e ................................... ................................... Invent Inv entor ory y .............................................. ............................................................... ................. Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ........ ...

90,000 90,000

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5-9

BRIEF EXERCISE 5-3 (Continued) (c) Cash ($810,000 – $16,200) .................................. .................................. Sales Disco Dis coun unts ts ($810,00 ($810,000 0 X 2%).......... ............... .......... ........ ...  Acc  A cc ount ou nts s Recei Rec eivab vabll e ............................. .................................. ..... ($900,000 – $90,000)

793,800 16,200 16,200 810,000

BRIEF EXERCISE 5-4 (a) Inv entor ent or y ............................................. .............................................................. .................  Acc  A cc ount ou nts s Payabl Payab l e........................................ ........................................

900,000

(b) Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... .......... ....... .. Inv ento ent o ry ................................................. ...................................................... .....

90,000 90,000

(c) Acco Ac coun unts ts Payabl e ($900,00 ($900,000 0 – $90,000) $90,000) .......... ............ .. Inventory ($810,000 X 2%)........................................ ........................................ Cash ($810,000 – $16,200) .......................... ..........................

810,000 810,000

900,000 90,000

16,200 793,800

BRIEF EXERCISE 5-5 Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... .......... ....... .. Invent Inv entor ory y ............................................... .............................................................. ...............

2,300 2,300 2,300

BRIEF EXERCISE 5-6 Sales Revenue Reven ue ............................................ ............................................................. ................. Incom Inc om e Summ Sum m ary ............................................ ................................................ ....

195,000

Incom Inc om e Summ Sum m ary ............................................ ........................................................ ............ Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ..... Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... .......... .....

119,000

5-10

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BRIEF EXERCISE 5-7  ARNDT  A RNDT COMPANY Income Incom e Statement Statement (Partial) (Partial) For the Month Ended October 31, 2014 Sales Sales revenues Sales revenu rev enue e ($280,000 + $100,000) ................ Less: Less : Sales Sales return retu rns s and allowanc allo wances es ...... ......... ...... ...... ..... Sales disc di scou ount nts s .......... ............... .......... .......... .......... .......... ......... .... Net sales sal es ............................................... .............................................................. ...............

$380,000 $11,0 $11,000 00 5,000 5,000

16,000 16,000 $364,000

BRIEF EXERCISE 5-8  As the th e name nam e sugg su ggest est s , num nu m erous ero us st eps are requi req uired red i n determ det ermii ni ng net income in a multiple-step income statement. In contrast, only one step is required to compute comp ute net income in a singlesin gle-step step income incom e statement. statement. A multiplemulti plestep statement statement has five section s where w hereas as a single-step single-step st atement atement has onl y two sections. The multiple-step statement provides more detail than a singlestep statement, statement, but net inco me is t he same under under bo th s tatements. tatements. Some of the dif ferences ferences in presentation presentation can be seen seen fr om t he comparative infor mation pr esented esented below. (1) (1) Multiple-Ste Multi ple-Step p Income Incom e Statement Statement a. b. c. d.

It em

Sec t i o n

Gain on sale of equipment Interest expense Casualty Casualty los s from vandalism vandalism Cost of goods sold

Other revenues and gains Other expens expenses es and and loss l oss es Other expens expenses es and and loss l oss es Cost of goods sol d

(2) (2) Single-Step Sing le-Step Income Inco me Statement It em a. b. c. d.

Gain on sale of equipment Interest expense Casualty Casualty los s from vandalism vandalism Cost of goods sold

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Sec t i o n Revenues Expenses Expenses Expenses

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5-11

BRIEF EXERCISE 5-9 (a) Net sales sal es = $510,000 – $15,000 = $495,000. (b) Gross Gro ss pro p rofi fitt = $495,000 $495,000 – $330,000 $330,000 = $165,000 $165,000.. (c) Incom Inc ome e from fr om operati op erati ons on s = $165,000 $165,000 – $110,000 $110,000 = $55,000. $55,000. (d) Gross Gro ss pr ofit of it rate r ate = $165,000 $165,000 ÷ $495,000 $495,000 = 33.3%. 33.3%.

*BRIEF EXERCISE 5-10 (a) (a) Cash: Cash: Trial balance balance debit colum n; Adju sted trial balance balance debit colum n; Balance Balance sheet sheet debit colum n. (b) Inventory: Inventory: Trial balance balance debit column ; Adju sted trial balance balance debit colu mn; Balance sheet sheet debit debit co lumn . (c) Sales Sales revenue: revenue: Trial Trial balance balance credit colu mn; A djust ed trial balance balance credit column, Income Income st atement atement credit colu mn. (d) Cost of goods sold: Trial Trial balance balance debit colum n, Adju sted trial balance balance debit colu mn, Income stateme statement nt debit c olumn. olum n. *BRIEF EXERCISE 5-11 Purc Pur c hases has es ............................................... ...................................................................... ......................... Less: Less : Purchase Purc hase return retu rns s and allowanc allo wances es ...... ......... ...... ...... ...... ..... .. Purch Pur chase ase disc di scou ount nts s .......... ............... .......... .......... .......... .......... .......... ........ ... Net purc pu rc hases has es ............................................. ................................................................ ...................

$450,000 $13,00 $13,000 0 8,000 8,000

Net purc pu rc hases has es ............................................. ................................................................ ...................  Add  A dd:: Frei ght gh t -in ............................................ .............................................................. .................. Cost Cos t of good go ods s purc pu rchas hased ed .......... ............... .......... .......... .......... .......... .......... .......... .......

5-12

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*BRIEF EXERCISE 5-12 Net sales sal es ............................................. ...................................................................... ............................. .... Begin Beg inni ning ng inven in vento tory ry .......... .............. ......... .......... .......... .......... .......... .......... .......... .......... ....... $ 60,000 60,000  Add:  Ad d: Cost Cos t of good go ods s p urc ur c hased* has ed* .................................. .................................. 445,000 Cost Cos t of good go ods s availab avai lable le for fo r sale sal e .......... ............... .......... .......... .......... .......... ..... 505,000 505,000 Endin End ing g inven in vento tory ry .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... .......... ..... 90,000 90,000 Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Gros Gro s s prof pr ofii t ............................................ ................................................................... ......................... ..

$730,000

415,000 415,000 $315,000

*Info *Informati rmation on taken fro m Brief Br ief Exercise 5-11 5-11.. *BRIEF EXERCISE 5-13 (a) (b) (c)

Purc Pur c hases has es ................................................. .............................................................. .............  Acc  A ccou oun n ts Payable Payab le .......................................... ..........................................

900,000

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... .......... ......... .... Purchase Purc hase Return s and Allo Al lowanc wances es ...... ......... ...... ..... ..

130,000 130,000

Acco Ac coun unts ts Payable Payabl e ($900,00 ($900,000 0 – $130,000 $130,000)) .......... ............ .. Purch Pur chase ase Disco Dis coun unts ts ($770,00 ($770,000 0 X 2%) .......... ............ Cash ($770,000 – $15,400) ............................. .............................

770,000 770,000

900,000 130,00 130,000 0 15,400 15,400 754,600

*BRIEF EXERCISE 5-14 Invent Inv entor ory y (endi ng) ng ) .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... ........ ... Sales Revenue Reven ue ................................................ ................................................................ ................ Purch Pur chase ase Retur ns and Al lowan lo wances ces .......... ............... .......... .......... .......... ....... Incom Inc om e Summ Sum m ary ............................................. .................................................. .....

30,000 30,000 180,000 30,000 30,000

Incom Inc om e Sum mary mar y ............................................ ........................................................... ............... Purc Pur c hases has es ................................................ .............................................................. .............. Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... .......... ....... .. Invent Inv entor ory y (begi nnin nn ing) g) .......... ............... .......... .......... .......... .......... .......... ......... ....

162,000

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5-13

*BRIEF EXERCISE 5-15 (a) (a)

Cash: Cash: Trial balance balance debit column; Adj usted trial balance balance debit colu mn; Balance sheet sheet debit debit co lumn .

(b)

Beginning inventory: Trial Trial balance balance debit colum n; Adjusted trial balance balance debit colum n; Income statement statement debit col umn.

(c)

Accou nts payable: payable: Trial Trial balance balance credit colum n; Adjus ted trial balance balance credit col umn; B alance alance sheet sheet credit co lumn.

(d)

Ending inventory : Income statement statement credit credit column; Balance Balance sheet sheet debit column.

5-14

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SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 5-1 Oct. Oct . 5

Oct. Oct . 8

Invent Inv entor ory y ........................................... ................................................................. ......................  Acc  A cc ount ou nts s Payabl Pay able e ............................................ ............................................ (To (To record goo ds pur chased on account)

5,000

Acco Ac coun unts ts Payable.... Payabl e......... .......... .......... .......... .......... .......... .......... .......... .......... ....... .. Invent Inv entor or y .............................................. ........................................................... ............. (To (To record r eturn of defectiv defectiv e goods)

650

5,000

650

DO IT! 5-2 Oct. Oct . 5

Oct. Oct . 8

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... .......... .......... ..... Sales Revenu Reven u e ............................................ .................................................. ...... (To (To record credit credi t sales)

5,000 5,000

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ........ ... Invent Inv entor or y ............................................. .......................................................... ............. (To (To record cost of go ods sol d on account)

3,100 3,100

Sales Retur ns and Allo Al lowan wances ces .......... ............... .......... .......... ........ ...  Acc  A cc ount ou nts s Rec eivabl eiv able e ...................................... ...................................... (To (To record c redit granted for r eceipt eceipt of returned goods)

650

Invent Inv entor ory y ............................................ ................................................................. ..................... Cost Cos t of Goods Goo ds Sold Sol d .......... .............. ......... .......... .......... .......... .......... ....... .. (To (To record fair value of g oods returned)

100

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5,000

3,100

650

100

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5-15

DO IT! 5-3 Dec. 31 Sales Revenu Rev enue e............................................. ........................................................ ........... 156,000 Interes Int eres t Revenue Reven ue .............................................. ................................................... ..... 5,000 Incom Inc om e Sum mary mar y ............................................. ............................................. (To (To cl ose accounts w ith credit balances) Incom Inc om e Summ Sum m ary ............................................ ................................................... ....... 127,800 Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... ....... Sales Retur ns and Allo Al lowan wances ces .......... ............... .......... ........ ... Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... ....... .. Frei ght gh t -Out ............................................. ....................................................... .......... Utili Uti li ties ti es Expens Exp ense e .......... ............... .......... .......... .......... .......... .......... .......... ....... Salari es and Wages Expens Exp ense e .......... ............... .......... .......... ..... (To (To cl ose accounts with debit balances) balances)

5-16

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92,400 92,400 4,000 4,000 3,000 3,000 1,500 7,400 7,400 19,500 19,500

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DO IT! 5-4  Acc  A ccou ount nt

Financ Fin ancii al St atement atem ent

Clas si f ic ation ati on

 Acc  A ccou ount nt s Payabl Pay able e  Acc  A ccou ount nt s Receiv Rec eiv able abl e  Acc  A ccum um ul ated Depreci Depr eci ation ati on— —   Buildings Cas h Casualty Casualty Loss f rom Vandalism Co s t o f Go o d s So l d Depre precia ciation tion Expe xpense nse Equipment Equip ment

B alanc alan c e sheet sh eet Bal ance anc e sh eet Balance shee s heett

In c om om e s ta tat em em en en t Incom ncome e sta stateme tement nt Balance sheet

Fr ei g h t -O -Ou t Insur nsura ance nce Expe xpense nse In t er es t Pay ab l e In v en t o r y Land

In co co m e s t at em en en t Incom ncome e sta stateme tement nt B al an c e s h eet B al an c e s h eet Balance sheet

Notes Payable (due in 5 years) Owner’s Owner’s Capital Capital

B al an c e s h eet

Curren Cur rentt l i abil abi l i ti es Curren Cur rentt as set s Property, plant, and equipment Cu r r en t as s et s Other expenses and losses Co s t o f g o o d s s ol ol d Opera perati ting ng expe xpense nses Property, plant, and equipment Op er at in in g ex p en s es es Opera perati ting ng expe xpense nses Cu r r en t l i ab i l i t i es Cu r r en t as s et s Property, plant, and equipment L o n g -t er m l i ab i l i t i es

Owner’s Owner’s Drawings Drawings Pr o p er t y Tax es Pay ab l e Salaries and Wages Expense Sal ar i es an d Wag es Pay ab l e Sales Sales Returns and  Al  A l lowan lo wances ces Sal es es Rev en en u e Un ear n ed Ren t Rev en u e Utili tiliti tie es Expe xpense nse

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B al an c e s h eet Income statement

Owner’s Owner’s equity statement Owner’s Owner’s equity statement B al an c e s h eet

Beginning balance

Cu r r en t l i ab i l i t i es

Income statement B al an c e s h eet In c o m e s t at em en t

Operatin Operating g expenses Cu r r en t l i ab i l i t i es Sal es r ev en u es

In c o m e s t at em en t B al an c e s h eet Incom ncome e sta stateme tement nt

Sal es es r ev en en u es Cu r r en t l i ab i l i t y Opera perati ting ng expe xpense nses

Deducti Deducti on section

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5-17

SOLUTIONS TO EXERCISES EXERCISE 5-1 1. 2. 3. 4. 5. 6. 7. 8.

True. False. False. For a merchandis merch andiser, er, sales less cost of goods sold   is called gross profit . True. True. Fals False. e. The operatin g cycle cyc le of a merchandiser merchand iser differs   from that of a service company. The operating cycle of a merchandiser is ordinarily longer. False. Fals e. In a periodic  inventory system, no detailed inventory records of goods on h and are maintained. maintained. True. False. False. A perpetual perpetual inventory inventor y syst em provi des better control cont rol over inventories than a periodi periodi c sys tem.

EXERCISE 5-2 (a) (1) Apri Ap rill 5

Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......... ........ ...  Ac c ount ou nts s Payabl Payab l e .....................

23,000 23,000

Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......... ........ ... Cash ........................................... ...........................................

900

Equip Equ ipmen mentt .......... ............... .......... .......... .......... .......... .......... .......  Ac c ount ou nts s Payabl Payab l e .....................

26,000 26,000

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... ........ ... Invent Inv entor ory y ................................... ...................................

3,000 3,000

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... ........ ... ($23,000 – $3,000) Inventory [($23,000 – $3,000) X 2%] ..... Cash ($20,000 – $400) ..............

20,000 20,000

Acco Ac coun unts ts Payabl e .......... ............... .......... .......... .......... .......... ....... .. Cash ............................................. .................................................... .......

20,000 20,000

(2) Apri Ap rill 6 (3) Apri Ap rill 7 (4) Apri Ap rill 8 (5) A pril pr il 15

(b) May 4

5-18

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23,000 900 26,000 3,000

400 19,600

Weygandt, Accounting Principles, 11/e, Solutions Manual

20,000 (For Instructor Use Only)

EXERCISE 5-3 Sept. Sept . 6 9 10 12

14

20

Invent Inv entor ory y (80 X $20) ........................................ ........................................ Cash ............................................. ......................................................... ............

1,600

Invent Inv entor ory y ................................................. .......................................................... ......... Cash ................................................ ......................................................... .........

80

Acc A ccou ount nts s Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ........ ... Invent Inv entor ory y ............................................... .................................................. ...

63

Acco Ac coun unts ts Receiv able abl e (26 X $31) ......... .............. .......... ....... Sales Revenue Reven ue ......................................... ......................................... Cost Cos t of Goods Goo ds Sold Sol d (26 X $21) .......... ............... .......... ....... .. Invent Inv entor ory y ............................................ .................................................. ......

806

Sales Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ...... .....  Ac coun co untt s Receiv Rec eiv able abl e .............................. .............................. Invent Inv entor ory y ................................................. .......................................................... ......... Cost of Goods Sold................................. Sold .................................

31

Acco Ac coun unts ts Receiv able abl e (30 X $32) ......... .............. .......... ....... Sales Revenue Reven ue ......................................... ......................................... Cost Cos t of Goods Goo ds Sold Sol d (30 X $21) .......... ............... .......... ....... .. Invent Inv entor ory y ............................................ .................................................. ......

1,600 80 63 806 546 546 31 21 21 960 960 630 630

EXERCISE 5-4 (a) Jun Ju n e 10 11 12 19

Invent Inv entor ory y .............................................. .................................................. ....  Acc  A cco o unts un ts Payabl Payab l e ............................ ............................

8,000

Invent Inv entor or y ............................................ .................................................. ...... Cash ............................................. .................................................. .....

400

Acco Ac coun unts ts Payabl e .......... ............... .......... .......... .......... .......... ..... Invent Inv entor ory y .......................................... ..........................................

300

Acco Ac coun unts ts Payable Payabl e ($8,000 ($8,000 – $300) $300) ......... ......... Inventory ($7,700 X 2%)................................ ................................ Cash ($7,700 – $154) .......................

7,700 7,700

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8,000 400 300

154 7,546 (For Instructor Use Only) 

5-19

EXERCISE 5-4 (Continued) (b) June Ju ne 10

12

19

Acco Ac coun unts ts Receiv able abl e.......... ............... .......... .......... ......... .... Sales Revenue Reven ue ................................ ................................ Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... ....... Invent Inv entor ory y ......................................... .........................................

8,000 8,000

Sales Returns Return s and Allo Al lowanc wances es ...... ......... ...... .....  Ac coun co unts ts Receivab Recei vable le ..................... Invent Inv entor ory y .............................................. ................................................. ... Cost Cos t of Goods Goo ds Sold Sol d ......... .............. .......... .......... .....

300

Cash ($7,700 – $154).............................. .............................. Sales Disco Dis coun unts ts ($7,700 ($7,700 X 2%) .......... ............. ...  Ac coun co untt s Receiv Rec eivabl abl e ($8,000 – $300)............................ ............................

7,546 154

8,000 4,800 4,800 4,800 300 70 70

7,700

EXERCISE 5-5 (a) 1.

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... ....... .. Sales Revenue Reven ue ......................... ......................... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ..... Inv entor ent or y .................................. ..................................

570,000 570,000

Sales Return s and Allo Al lowanc wances es ...... ......  Acc  A cc ount ou nts s Receiv Rec eiv able abl e ..............

20,00 20,000 0

Cash ($550,000 – $11,000) .............. Sales Sales Discount s [ ($570,000 – $20,000) X 2%] ........  Acc  A cc ount ou nts s Receiv Rec eiv able abl e ($570,000 – $20,000) ............ ........ ....

539,000

(b) Cash ............................................ .................................................................... .............................. ......  Acc  A cc ount ou nts s Receiv Rec eiv able abl e ($570,000 – $20,000) ..................................... .....................................

550,000

2. 3.

5-20

Dec. 3

Dec. 8 Dec. 13

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570,000 350,000 350,000 350,000 20,000

11,000 550,000

Weygandt, Accounting Principles, 11/e, Solutions Manual

550,000

(For Instructor Use Only)

EXERCISE 5-6 (a)

TSIA COMPANY Income Incom e Statement Statement (Partial) (Partial) For t he Year Year End ed Octo ber 31, 2014 2014 Sales Sales revenues Sales r evenue even ue ............................................ .................................................. ...... Less: Less : Sales return retu rns s and allowanc allo wances es ...... ......... ..... .. Sales disc di scou ount nts s .......... ............... .......... .......... .......... ......... .... Net sales sal es ............................................... ......................................................... ..........

$820,000 $25,00 $25,000 0 13,000 13,000

38,000 38,000 $782,000

Note: Freight-out is a selli ng expense. expense. (b) (1) Oct. Oct . 31

Sales Revenue Reven ue .............................. .............................. Incom Inc ome e Summar Sum mary y .......... ............... ........ ...

820,000

Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... ....... Sales Sales Returns and  Al l owanc ow ances es ........................ ........................ Sales Disco Dis coun unts ts ......... .............. .......... .......

38,000 38,000

(a) Cost Cos t of Goods Goo ds Sold Sol d .......... ............... ......... ......... .......... .......... .......... .......... ........ ... Invent Inv entor ory y ............................................ ......................................................... .............

1,100 1,100

(b) Sales Revenue Reven ue ............................................ ....................................................... ........... Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... .......... .......... .......... ........ ...

115,000

Incom Inc om e Sum m ary ............................................... ................................................... .... Cost Cos t of Goods Goo ds Sold Sol d ($60,000 ($60,000 + $1,100) $1,100) ........ ........ Operatin Operat ing g Expens Exp enses es .......... ............... .......... .......... .......... .......... ........ ... Sales Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ...... ... Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... .....

93,000

Incom Inc ome e Summar Sum mary y ($115,00 ($115,000 0 – $93,000) $93,000) .......... ............... ..... Owner’ Own er’ s Capital Capi tal .............................................. ..............................................

22,000 22,000

(2)

31

820,000 820,000

25,000 13,000 13,000

EXERCISE 5-7

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Weygandt, Accounting Principles, 11/e, Solutions Manual

1,100 115,000 115,000 61,100 61,100 29,000 29,000 1,700 1,700 1,200 1,200 22,000

(For Instructor Use Only) 

5-21

EXERCISE 5-8 (a) Cost Cos t of Goods Goo ds Sold Sol d .......... .............. ......... .......... .......... .......... .......... ......... ........ .... Invent Inv entor or y ............................................ ........................................................ ............

600

(b) Sales Revenue Reven ue ........................................... ....................................................... ............ Incom Inc om e Sum mary mar y .......................................... ............................................

380,000

Incom Inc om e Summ Sum m ary ............................................ .................................................. ...... Cost Cos t of Goods Goo ds Sold Sol d ($218,00 ($218,000 0 + $600) $600)......... ......... Freig Fr eight ht-Out -Out ............................................. ..................................................... ........ Insur Ins uranc ance e Expens Exp ense e .......... ............... .......... .......... .......... .......... .......... ..... Rent Expen Ex pense se ............................................. ................................................. .... Salari es and Wages Expens Exp ense e .......... ............... .......... ........ ... Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... ..... Sales Retu Return rns s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ..... ..

335,600

Incom Inc ome e Summar Sum mary y ($380,00 ($380,000 0 – $335,600 $335,600)) .......... ............. ... Owner’ Own er’s s Capital Capi tal .......................................... ............................................. ...

44,400 44,400

600 380,000 218,600 218,600 7,000 12,000 12,000 20,000 55,000 55,000 10,000 10,000 13,000 13,000 44,400

EXERCISE 5-9 (a)

FURLOW COMPANY Income Incom e Statement Statement For the Month Ended March 31, 2014 Sales Sales revenues Sales revenu rev enue e ............................................ ................................................... ....... Less: Less : Sales return retu rns s and allowanc allo wances es ...... ......... ...... ..... .. Sales disc di scou ount nts s .......... .............. ......... .......... .......... .......... ....... .. Net s ales .............................................. ............................................................ .............. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ........ ... Gross Gro ss prof pr of i t ............................................. ............................................................ ............... Operating expenses Salari es and wages wag es expens exp ense e ......... .............. .......... .......... ........ ... Rent expens exp ense e .............................................. .................................................... ...... Freig Fr eight ht-ou -outt .......................................... ........................................................ .............. Insur Ins uranc ance e expens exp ense e .......... ............... .......... .......... .......... .......... .......... ........ ... Total Tot al operati op erati ng expens exp enses es .......... ............... .......... ..... Net i nco nc o me ............................................. ........................................................ ...........

$380,000 $13,0 $13,000 00 8,000 8,000

21,000 21,000 359,000 212,000 212,000 147,000

58,000 58,000 32,000 7,000 6,000 6,000 103,000 103,000 $ 44,000

(b) Gross Gro ss pr ofit of it rate r ate = $147,000 $147,000 ÷ $359,000 $359,000 = 40.95%. 40.95%. 5-22

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Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

EXERCISE 5-10 (a)

LEMERE COMPANY Income Incom e Statement Statement For the th e Year Year Ended End ed December 31, 2014 2014 Net sales sal es .............................................. .............................................. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... ......... .... Gross Gro ss prof pr ofit it .......... ............... .......... .......... .......... .......... .......... ....... Operatin Operat ing g expens exp enses es ......... .............. .......... .......... ........ ... Income Inco me from fr om operatio op eratio ns ...... ......... ...... ...... ...... ...... ... Other revenues and and gains gain s Interest Int erest revenu rev enue e .......... ............... .......... .......... ....... Other expenses and losses Interest Int erest expens exp ense e .......... ............... .......... .......... ....... Loss on disposal of plant assets ass ets ........................................ ........................................ Net i ncom nc om e .......................................... ..........................................

(b)

$2,200,000 1,289,00 1,289,000 0 911,000 911,000 725,000 725,000 186,0 186,000 00 $28,000 $28,000 $70,000 $70,000 17,000

87,000

59,000 $ 127,000

LEMERE COMPANY COMPANY Income Incom e Statement Statement For the th e Year Year Ended End ed December 31, 2014 2014 Revenues Net sales sal es .............................................. .............................................. Interest Int erest revenu rev enue e .......... ............... .......... .......... .......... ......... .... Total Tot al revenu rev enues es ......... .............. .......... .......... .......... ..... Expenses Cost of goods sol d .............................. Operatin Operat ing g expens exp enses es .......... ............... .......... .......... ........ ... Interest Int erest expens exp ense e .......... ............... .......... .......... .......... ......... .... Loss Los s on dispos dis posal al of plant assets .... ...... .... Total Tot al expens exp enses es .......... ............... .......... .......... ........ ... Net i ncom nc om e ............................................. .................................................. .....

Copyright © 2013 John Wiley & Sons, Inc.

$2,200,000 28,000 28,000 2,228,00 2,228,000 0 $1,289,000 725,000 725,000 70,000 70,000 17,0 17,000 00

Weygandt, Accounting Principles, 11/e, Solutions Manual

2,101,00 2,101,000 0 $ 127,000

(For Instructor Use Only) 

5-23

EXERCISE 5-11 1. 2.

3. 4.

Sales Retur ns and Al lowan lo wances ces .......... ............... .......... .......... .......... .......... .......... ....... Sales Revenu Reven u e ............................................. ............................................................ ...............

195

Supp Su ppll i es ............................................ ................................................................... .................................. ........... Cash ............................................ ................................................................... ........................................ .................  Acc  A cc ount ou nts s Payabl Payab l e................................................ ....................................................... ....... Inv ento ent o ry ................................................. ..................................................................... ....................

180 180

Sales Disc Dis c ount ou nts s ........................................... ................................................................. ...................... Sales Revenu Reven u e ............................................. ............................................................ ...............

215

Invent Inv entor ory y .............................................. ...................................................................... ............................... ....... Cash ............................................ ................................................................... ........................................ ................. Frei ght-o gh t-out ut ................................................. ................................................................... ..................

20 180

195

180 180 215

200

EXERCISE 5-12 (a) $900,000 – $522,000 = $378,000. (b) $378, $378,000 000/$9 /$900 00,00 ,000 0 = 42%. 42%. The gross gros s profi pro fitt rate is generally generall y consi con sidered dered to be more useful than the gross profit amount. The rate expresses a more meaningful (qualitative) relationship between net sales and gross profit. The gross profit rate tells how many cents of each sales dollar go to gross profit. The trend of the gross profit rate is closely watched by financial statement users, and is compared with rates of competitors and with industry averages. Such comparisons provide information about the effectivene effectiveness ss of a company’s purchasing function fun ction and the soundness of its pri cing policies. (c) Income Inco me from fro m operatio oper ations ns is i s $153, $153,000 000 ($378, ($378,000 000 – $225,0 $225,000), 00), and net incom inc ome e i s $142,000 ($153,000 ($153,000 – $11,000). (d) The amount shown show n for net income is the same in a mult iple-step income inco me statement statement and a singlesin gle-step step income inc ome statement. statement. Both income inco me statements statements report the same revenues revenues and expenses, but i n different di fferent order. or der. Therefore, Therefore, net inc ome in Cruz’s si nglengl e-step step in com e statement is also $142 $142,0 ,000 00.. (e) Inventory is reported as a current asset immediately below accounts receivable.

5-24

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

EXERCISE 5-13 (a) (*missing amount) a.

Sales r evenue even ue ............................................... ............................................................... ................ *Sales retu ret u rns rn s ............................................ ................................................................ .................... Net sal es....................................... es.............................................................. ................................. ..........

$ 90,000 ) (3,000) $ 87,000 )

b.

Net s ales .............................................. ...................................................................... .......................... .. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... ..... *Gro ss prof pr of it .............................................. .................................................................. ....................

$ 87,000 ) (56,000) (56,000) $ 31,000 )

c.

Gros Gro s s prof pr of it ............................................... ................................................................... .................... Operati Oper ating ng expens exp enses es ........................................... ..................................................... .......... *Net i ncom nc om e ............................................ ................................................................... .........................

$ 31,000 ) (15,000) $ 16,000 )

d.

*Sales revenu rev enue e ............................................ ............................................................... ................... Sales returns................................................................. returns ................................................................. Net sal es....................................... es.............................................................. ................................. ..........

$107,000 ) (5,000) $102,000 )

e.

Net sal es......................................... es................................................................. ............................... ....... *Cost *Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... ..... Gross Gro ss prof pr of it ........................................... ................................................................... ........................

$102,000 ) 60,500 60,500 ) $ 41,500 )

f.

Gros Gro s s prof pr of it ............................................... ................................................................... .................... *Operatin *Operat ing g expens exp enses es .......... ............... .......... .......... .......... .......... .......... .......... .......... ........ ... Net i ncom nc om e ............................................ .................................................................... ........................

$ 41,500 ) 26,500 26,500 ) $ 15,000 )

) (b) May Company Gross profit ÷ Net sales = $31,000 ÷ $87,000 = 35.6% Reed Reed Company Comp any Gross profit ÷ Net sales = $41,500 ÷ $102,000 = 40.7%

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only) 

5-25

EXERCISE 5-14 (*Missing (*Missing amount) (a)

Sales rev enue enu e ............................................ ......................................................... ............. Sales retur ret urns ns and allow all owanc ances es .......... ............... .......... .......... .......... ....... Net s ales .............................................. .................................................................. ....................

$ 90,000 4,000* 4,000* $ 86,000

(b)

Net sales sal es .............................................. .................................................................. .................... Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ......... .... Gross Gro ss p rofi ro fi t .............................................. ............................................................. ...............

$ 86,000 56,000 56,000 $ 30,000*

(c) and (d) Gross Gro ss pr ofi of i t ............................................ ............................................................. ................. Operatin Operat ing g expens exp enses es ......... .............. .......... .......... .......... .......... .......... .......... ........ ... Incom Inc ome e from fr om operati op erati ons on s (c) .......... ............... .......... .......... .......... .......... ..... Other Oth er expens exp enses es and loss lo sses es .......... ............... .......... .......... .......... .......... ..... Net i nco nc o me (d) .............................................. ......................................................... ...........

$ 30,000 15,000 15,000 $ 15,000* 15,000* 4,000 4,000 $ 11,000*

(e)

Sales rev enue enu e ............................................. ......................................................... ............ Sales retur ret urns ns and allow all owanc ances es .......... ............... .......... .......... .......... ....... Net s ales .............................................. .................................................................. ....................

$100,000* 5,000 5,000 $ 95,000

(f)

Net sales sal es ................................................ .................................................................. .................. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ......... .... Gross Gro ss pr ofi of i t ............................................ ............................................................. .................

$ 95,000 57,000* 57,000* $ 38,000

(g) and (h) Gross Gro ss pr ofi of i t ............................................ ............................................................. ................. Operatin Operat ing g expens exp enses es (g) .......... ............... .......... .......... .......... .......... .......... ....... .. Incom Inc ome e from fr om operati op erati ons on s (h) .......... ............... .......... .......... .......... .......... ..... Other Oth er expens exp enses es and loss lo sses es .......... ............... .......... .......... .......... .......... ..... Net i nc ome om e ............................................... .............................................................. ...............

$ 38,000 20,000* 20,000* $ 18,000* 18,000* 7,000 7,000 $ 11,000

(i)

Sales revenu rev enue e .............................................. ......................................................... ........... Sales retur ret urns ns and allow all owanc ances es .......... ............... .......... .......... .......... ....... Net s ales .............................................. .................................................................. ....................

$122,000 12,000 12,000 $110,000*

(j)

Net sales sal es ............................................... .................................................................. ................... Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ......... .... Gross Gro ss p rofi ro fi t .............................................. ............................................................. ...............

$110,000 86,000* 86,000* $ 24,000

5-26

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

EXERCISE 5-14 (Continued) (k) and (l) Gross Gro ss prof pr of it ............................................ ............................................................ ................ Operatin Operat ing g expens exp enses es ......... .............. .......... .......... .......... .......... .......... .......... ........ ... Incom Inc ome e from fr om operati op erati ons on s (k) .......... .............. ......... .......... .......... .......... ....... Other Oth er expens exp enses es and loss lo sses es (l) .......... ............... .......... .......... .......... ..... Net i ncom nc om e ........................................... .............................................................. ...................

$24,000 18,000 18,000 $ 6,000* 6,000* 1,000* 1,000* $ 5,000

*EXERCISE 5-15  Ad ju st ed Trial Balance

 Ac co un ts

Debit Debit Cash Inventory Sales Revenue Sales Returns and Allowances Sales Sales Discoun ts Cost of Goods Sold

Credit Credit

Income Statement Debit Debit

Balance Sheet

Credit Credit

11,000   76,000

Debit Debit

Credit Credit

11,000 76,000 480,000

10,000   9,000 300,000

480,000 10,000 9,000 300,000

*EXERCISE 5-16 MARQUEZ COMPANY Worksheet For t he Month Ended June Ju ne 30, 30, 2014 2014  Ac co un t Titl Ti tl es Cas h  Acc ounts oun ts Receivabl e In ven t o r y  Ac co unts un ts Payable Payab le Ow n er ’ s Cap i t al Sal es Reven u e Co s t o f Go o d s So l d Ope Operating rating Expe Expense nses s To t al s Net Inco me Totals otals

Tri al Balan B alan ce Dr. Cr. 1,920 2,440 11,640 1,120 3,500 42,500 20,560 10,5 10,56 60 47,120 47,120

Copyright © 2013 John Wiley & Sons, Inc.

Ad ju st men ts Dr. Cr.

1,500

1,50 1,500 0 1,500

1,500

 Ad j. Trial Tr ial Balance Dr. Cr. 1,920 2,440 11,640 2,620 3,500 42,500 20,560 12, 12,060 060 48,620 48,620

Income Statement Dr. Cr.

Balance Sheet Dr. Cr. 1,920 2,440 11,640 2,620 3,500

42,500 20,560 12, 12,060 060 32,620 9,880 42,500

Weygandt, Accounting Principles, 11/e, Solutions Manual

42,500

16,000

42,500

16,000

6,120 9,880 16,000

(For Instructor Use Only) 

5-27

*EXERCISE 5-17 Invent Inv entor ory, y, September Septem ber 1, 2013 ......... .............. .......... .......... .......... .......... .......... ..... Purc Pur c hases has es ............................................... ...................................................................... ......................... Less: Less : Purchase Purc hase return retu rns s and allowanc allo wances es ...... ......... ...... ...... ...... ..... .. Net Purc Pur c hases has es ............................................ ................................................................ ....................  Add  A dd:: Frei ght-i gh t-i n ......................... ............................................... ..................................... ............... Cost Cos t of good go ods s purc pu rchas hased ed .......... ............... .......... .......... .......... .......... .......... .......... ....... Cost Cos t of good go ods s availab avai lable le for fo r sale sal e .......... ............... ......... ......... .......... ......... ...... .. Invent Inv entor ory, y, Augu Au gust st 31, 2014 .......... ............... .......... .......... .......... .......... .......... ........ ... Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ........ ...

$17,200 $17,200 $149,000 2,000 2,000 147,000 5,000 152,000 152,000 169,200 169,200 23,000 23,000 $146,200 $146,200

*EXERCISE 5-18 (a)

Sales rev enue enu e........................................ ........................................ Less: Les s: Sales Sales returns and allowances .... Sales disc di scou ount nts s .......... .............. ......... .......... ....... Net s ales ............................................. ................................................ ... Cost of goods sold Invent Inv entor ory, y, Januar Jan uary y 1 .......... ............... .......... ........ ... Purc Pur c hases has es ........................................ ........................................ Less: Less : Purc h. rets. rets . and alls . ...... ......... ..... .. Purch. Purc h. disc di scou ount nts s ...... ......... ...... ...... ..... .. Net purc pu rchas hases es .......... ............... .......... .......... .......... ........ ...  Add  A dd:: Fr eight eig ht -in ................................ ................................ Cost of good go ods s available avail able for fo r sale .... .... Invent Inv entor ory, y, December Decemb er 31 .......... ............... ....... .. Cost of good go ods s sold so ld ...... ......... ...... ...... ...... ... Gross Gro ss prof pr ofit it .......... ............... .......... .......... .......... .......... ....... ..

$840,000 $ 10,000 10,000 5,000 5,000

15,000 15,000 825,000

50,000 50,000 $509,000 2,000 2,000 6,000 6,000 501,000 501,000 4,000 555,0 555,000 00 60,000 60,000 495,00 495,000 0 $330,000 $330,000

(b)

Gross Gros s prof pr ofit it $330 $330,00 ,000 0 – Operatin g expenses expens es = Net inco in come me $130,0 $130,000. 00. Operating Operati ng expens es = $200,00 $200,000. 0.

5-28

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Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

*EXERCISE 5-19 (a) (b) (c) (d) (e) (f)

$1,580 $1,690 $1,530 $30 $250 $120

($1,620 – $40) ($1,580 + $110) ($1,840 – $310) ($1,060 – $1,030) ($1,280 – $1,030) ($1,350 – $1,230)

(g) (h) (i) (j) (k) (l)

$6,500 $1,730 $8,940 $6,200 $2,500 $43,330

($290 + $6,210) ($7,940 – $6,210) ($1,000 + $7,940) ($49,530 – $43,330 from from (I (I)) ($43,590 – $41,090) ($41,090 + $2,240)

*EXERCISE 5-20 (a) 1. 2. 3. 4.

5.

(b)

Apri Ap rill 5 Apri Ap rill 6 Ap ril ri l 7 Apr A prilil 8

Apr il 15

May May

4

Purch Pur chases ases .......... ............... .......... .......... .......... .......... .......... .....  Acc  A cc ount ou nts s Payabl Pay abl e .....................

25,000 25,000

Freigh Frei ght-i t-in n .......... ............... .......... .......... .......... .......... .......... ....... Cash ........................................... ...........................................

900

Equip Equ ipmen mentt ......... .............. .......... .......... .......... .......... .......... .....  Acc  A cc ount ou nts s Payabl Pay abl e .....................

30,000 30,000

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... ....... .. Purchase Returns and  Al  A l low lo w ances anc es ............................. .............................

2,800 2,800

Acc ounts oun ts Payable Payable ($25,000 – $2,800) ........................ Purchase Disco Disco unts [ ($25,000 – $2,800) X 2%)] ..... Cash ($22,200 – $444) ............... Acc ounts oun ts Payable Payable ($25,000 – $2,800) ........................ ........................ Cash ........................................... ...........................................

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

25,000 900 30,000

2,800 22,200 444 21,756 22,200 22,200

(For Instructor Use Only) 

5-29

*EXERCISE 5-21 (a) 1. 2. 3. 4.

5.

(b)

A pril pr il 5 Apri Ap rill 6 Apr A prilil 7 Apri Ap rill 8

A pril pr il 15

May May

4

Purch Pur chases ases .......... ............... .......... .......... .......... .......... ......... ....  Ac coun co untt s Payabl Pay able e .....................

19,000 19,000

Freigh Frei ght-i t-in n .......... ............... .......... .......... .......... .......... .......... ....... Cash ........................................... ...........................................

800

Equip Equ ipmen mentt .......... ............... .......... .......... .......... .......... ......... ....  Ac coun co untt s Payabl Pay able e .....................

23,000 23,000

Acco Ac coun unts ts Payable.... Payabl e......... .......... .......... .......... ........ ... Purchase Returns and  Al l owanc ow ances es ............................ ............................

4,000 4,000

Acco Ac coun unts ts Payable.... Payabl e......... .......... .......... .......... ........ ... ($19,000 – $4,000) Purchase Discounts [($19,000 – $4,000) X 2%)] ..... Cash ($15,000 – $300)............... $300) ...............

15,000 15,000

19,000 800 23,000

4,000

300 14,700

Acc ounts oun ts Payable Payable ($19,000 – $4,000)........................ $4,000)........................ Cash ........................................... ...........................................

15,000 15,000

*EXERCISE 5-22  Ac c ou nt s

 Ad ju st ed Trial Balance Debit

Cash Inventory Purchases Purchase Returns and  Al lo wan ces Sales Revenue Sales Sales Returns and  Al lo wan ces Sales Sales Discoun ts Rent Rent Expense

5-30

Copyright © 2013 John Wiley & Sons, Inc.

Credit redit

9,000   80,000 240,000

Income Statement Debit 80,000 240,000

30,000 450,000   10,000   5,000 42,000

Balance Sheet

Credit redit

Debit

75,000

9,000 75,000

Credit redit

30,000 450,000   10,000   5,000 42,000

Weygandt, Accounting Principles, 11/e, Solutions Manual

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PROBLEM 5-1A

(a) June Ju ne

1 3

6 9

15 17

20 24

26

Invent Inv entor ory y .......................................... ....................................................... .............  Acc  A ccou oun n ts Payabl Payab l e ................................ ................................

1,600

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ..... Sales Revenue Reven ue ...................................... ......................................

2,500 2,500

Cost Cos t of Goods Goo ds Sold Sol d .......... .............. ......... .......... .......... .......... ........ ... Invent Inv entor ory y .......................................... ............................................... .....

1,440 1,440

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ..... Invent Inv entor or y ............................................... ...............................................

100

Acco Ac coun unts ts Payable Payabl e ($1,600 ($1,600 – $100)... $100)........ .......... ....... Inventory ($1,500 X .02) .................................... .................................... Cash ............................................... ...................................................... .......

1,500 1,500

Cash ............................................... .............................................................. ...............  Acc  A cco o unts un ts Recei vable vab le ........................... ...........................

2,500

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ..... Sales Revenue Reven ue ...................................... ......................................

1,800 1,800

Cost Cos t of Goods Goo ds Sold Sol d .......... .............. ......... .......... .......... .......... ........ ... Invent Inv entor ory y .......................................... ............................................... .....

1,080 1,080

Invent Inv entor ory y ............................................. ....................................................... ..........  Acc  A ccou oun n ts Payabl Payab l e ................................ ................................

1,500

Cash ............................................... .............................................................. ............... Sales Disco Dis coun unts ts ($1,800 ($1,800 X .02) ......... .............. .......... .....  Acc  A ccou oun n ts Receiv Recei v able abl e ........................... ...........................

1,764 36

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ..... Inventory ($1,500 X .02) .................................... .................................... Cash ............................................. ...................................................... .........

1,500 1,500

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,600 2,500 1,440 100

30 1,470 2,500 1,800 1,080 1,500

1,800

30 1,470

(For Instructor Use Only) 

5-31

PROBL PROBLEM EM 5-1 5-1A A (Cont inued) in ued) June Ju ne 28

30

5-32

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ..... Sales Revenue Reven ue ...................................... ......................................

1,400 1,400

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ........ ... Invent Inv entor ory y ............................................... ...............................................

850

Sales Returns Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... .....  Ac c ount ou nts s Receivab Recei vable le ...........................

120

Inv ento ent o ry ............................................... ....................................................... ........ Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .....

72

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,400 850 120 72

(For Instructor Use Only)

PROBLEM 5-2A (a) Dat e May 1 2

5 9

10

11 12 15 17 19

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......... ......... .... Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......

Ref . 120 201

Deb i t 4,200

Acco Ac coun unts ts Receivable... Receivabl e...... ...... ...... ...... ...... ...... ...... ... Sales Revenue Reven ue ........................... ...........................

112 401

2,100

Cost of Goods Sold .......................... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......

505 120

1,300

Acco Ac coun unts ts Payabl e .......... ............... .......... .......... ......... .... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......

201 120

300

Cash ($2,100 ($2,100 – $21)...... $21)........... .......... .......... .......... ....... Sales Disco Dis coun unts ts ($2,100 ($2,100 X 1%) 1%) ........ ........  Acc  A cc ount ou nts s Rec eivabl eiv able e ................

101 414 112

2,079 21

Accoun Acc ounts ts Payable Payable ($4, ($4,20 200 0 – $300 $300)) .... ...... .. Invent Inv entor ory y ($3,900 ($3,900 X 2%) .......... ............ .. Cash ........................................... ...........................................

201 120 101

3,900

Suppl Sup pl i es ............................................. ............................................. Cash ........................................... ...........................................

126 101

400

Invent Inv entor ory y ............................................ ............................................ Cash ........................................... ...........................................

120 101

1,400

Cash ................................................ ................................................... ... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... .......

101 120

150

Invent Inv entor ory y ............................................ ............................................ Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......

120 201

1,300

Invent Inv entor ory y ............................................ ............................................ Cash ........................................... ...........................................

120 101

130

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

J1 Cr ed i t 4,200 2,100 1,300 300

2,100 78 3,822 400 1,400 150 1,300 130

(For Instructor Use Only) 

5-33

PROBL PROBLEM EM 5-2 5-2A A (Cont inued) in ued)

Dat e May 24

25 27

29

31

5-34

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Cash ................................................ ..................................................... ..... Sales Revenue Reven ue ............................ ............................

Ref . 101 401

Deb i t 3,200

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ........ ... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

505 120

2,000

Invent Inv entor ory y ............................................. ............................................. Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ........ ...

120 201

620

Acco Ac coun unts ts Payable Payabl e.......... ............... .......... .......... .......... .......   Inventory ($1,300 X 2%) ........................... ........................... Cash ............................................. .............................................

201

1,300

120 101

Sales Sales Retur Returns ns and Allowanc All owances es .... ...... .... .... Cash ............................................. .............................................

412 101

70

Inventory ............................................. Cost of Goods Good s Sold ...... ......... ...... ...... ...... ..... ..

120 505

30

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... ..... Sales Revenue Reven ue ............................ ............................

112 401

1,000

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ........ ... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

505 120

560

Copyright © 2013 John Wiley & Sons, Inc.

J1 Cr ed i t 3,200 2,000 620

26 1,274 70 30

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,000 560

(For Instructor Use Only)

PROBL PROBLEM EM 5-2A 5-2A (Con (Conti tinu nued) ed) (b) Cash Date Date May

No. 101 1 9 10 11 12 15 19 24 27 29

Explanatio n Balance

Ref. Ref.

Debit Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1

2,079

Credit

3,822 400 1,400 150 130 3,200 1,274 70

 Ac coun co unts ts Receivab Recei vable le Date Date May

Explanatio n 2 9 31

No. 112 Ref. Ref. J1 J1 J1

Debit Debit 2,100

Credit 2,100

1,000

Inventor y Date Date May

Balance 5,000 7,079   3,257   2,857   1,457   1,607   1,477   4,677   3,403   3,333

Balance 2,100 0 1,000 No. 120 120

Explanation Explanatio n 1 2 5 10 12 15 17 19 24 25 27 29 31

Copyright © 2013 John Wiley & Sons, Inc.

Ref. Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit Debit 4,200

Credit 1,300 300 78

1,400 150 1,300 130 2,000 620 26 30

Weygandt, Accounting Principles, 11/e, Solutions Manual

560

Balance 4,200 2,900 2,600 2,522 3,922 3,772 5,072 5,202 3,202 3,822 3,796 3,826 3,266

(For Instructor Use Only) 

5-35

PROBL PROBLEM EM 5-2 5-2A A (Cont inued) in ued) Suppli Supp lies es

No. 126

Dat e Ex pl pl an at io io n May 11

Ref . J1

Deb i t 400

Cr ed i t

 Acc  A cco o unts un ts Payable Payab le Date May

No. 201

Expl Expla anatio nation n

Ref. J1 J1 J1 J1 J1 J1

1 5 10 17 25 27

Debit 300 3,900 1,300

Credit redit Bala Balanc nce e 4,200   4,200   3,900 0 1,300   1,300 620   1,920 620

Owner’ s Capital Date May May

No. 301

Expla Explana nation tion 1 Balance Balance

Ref.

Debit

Credit redit

Sales Revenue Revenu e Date May

Ref. J1 J1 J1

2 24 31

Debit

Credit redit Bala Balance nce 2,100   2,100 3,200 5,300 1,000 6,300

Sales Sales Retur Returns ns and All owances Expl Expla anatio nation n

No. 412 412 Ref. J1

Debit 70

Credit redit

Sales Sales Discount Disco unts s Date May

5-36

Expl Expla anatio nation n 9

Copyright © 2013 John Wiley & Sons, Inc.

Bala Balance nce 5,00 5,000 0 No. 401

Expla Explana nation tion

Date May 29

B al an c e 400

Bala Balance nce 70 No. 414 414

Ref. J1

Debit 21

Credit redit

Weygandt, Accounting Principles, 11/e, Solutions Manual

Bala Balance nce 21

(For Instructor Use Only)

PROBL PROBLEM EM 5-2A 5-2A (Con (Conti tinu nued) ed) Cost of Goods Sold Date Date May

(c)

No. 505 505

Explana Explanation tion 2 24 29 31

Ref. J1 J1 J1 J1

Debit Debit 1,300 2,000

Credit Credit

30 560

Balance Balance 1,300 3,300 3,270 3,830

LATONA LA TONA HARDWARE STORE Income Incom e Statement Statement (Partial) (Partial) For t he Month Mont h Ended End ed May 31, 31, 2014 2014 Sales Sales revenues Sales r evenue even ue ............................................ ..................................................... ......... Less: Less : Sales return retu rns s and allowanc allo wances es ...... ......... ...... ...... ... Sales disc di scou ount nts s .......... ............... .......... .......... .......... .......... ........ ... Net sal es ................................................. ............................................................. ............ Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... .......... ....... .. Gros Gro s s prof pr of it .............................................. ................................................................ ..................

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Weygandt, Accounting Principles, 11/e, Solutions Manual

$6,300 $70 21

91 6,209 3,830 3,830 $2,379

(For Instructor Use Only) 

5-37

PROBLEM 5-3A

(a)

THE DELUXE STORE Income Incom e Statement Statement For t he Year Year End ed November Novem ber 30, 2014 2014

Sales Sales revenues Sales revenu rev enue e ..................................... ..................................... Less: Sales Sales return s & allowances allow ances ... ... Net s ales ............................................. ............................................. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... ..... Gross Gro ss prof pr ofit it .......... .............. ......... .......... .......... .......... .......... .......... ........ ... Operating expenses Salaries and wages expense expens e...... ...... Rent expens exp ense e ............................... ............................... Sales comm co mmis issi sion ons s expense expens e ..... ..... Depreciat Deprec iatio ion n expens exp ense e ......... .............. ........ ... Utili Uti liti ties es expens exp ense e .......... ............... .......... .......... ....... Insur Ins uranc ance e expens exp ense e .......... ............... .......... ....... .. Freigh Frei ght-o t-out ut ......... .............. .......... .......... .......... .......... ....... Proper Pro perty ty tax expens exp ense e .......... ............... ........ ... Total Tot al oper. op er. expens exp enses es .......... ............ Incom Inc ome e from fr om operati op erati ons on s .......... ............... .......... .......... ....... .. Other revenues and and gains gain s Interes Int erestt revenu rev enue e .......... ............... .......... .......... .......... ........ ... Other expenses and losses Interes Int erestt expens exp ense e.......... ............... .......... .......... .......... ........ ... Net i ncom nc om e.............................................. ................................................. ...

5-38

Copyright © 2013 John Wiley & Sons, Inc.

$700,000 8,00 8,000 0 692,000 507,000 507,000 185,000 185,000 $96,00 $96,000 0 15,000 11,000 11,000 11,000 11,000 8,500 8,500 7,000 7,000 6,500 6,500 2,500 2,500 157,500 157,500 27,500 27,500 8,000 8,000 6,400 6,400

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,600 1,600 $ 29,100

(For Instructor Use Only)

PROBL PROBLEM EM 5-3A 5-3A (Con (Conti tinu nued) ed) THE DELUXE STORE Owner’s Equity Statement For t he Year Year End ed November Novem ber 30, 2014 2014 Owner’ Own er’s s Capi Capital tal,, Decemb er 1, 1, 2013 ......... .............. .......... .......... .......... .......... .......... .......... ......... ....  Add:  Ad d: Net i ncom nc om e .............................................. ...................................................................... ............................... ....... Less: Les s: Drawi Draw i ngs ng s ............................................. .................................................................... ................................... ............ Owner’ Own er’s s Capi Capital tal,, Novemb Nov ember er 30, 30, 2014.......... ............... .......... .......... .......... .......... .......... .......... .......

$101,700 $101,700 29,100 130,800 10,000 $120,800 $120,800

THE DELUXE STORE Balance Sheet November 30, 2014  Ass  A ss ets Current assets Cash ............................................. .................................................... .......  Ac coun co unts ts recei rec eivab vabll e .......................... .......................... Invent Inv entor ory y ............................................. ............................................. Prepaid Prepai d insu in suran rance ce ......... .............. .......... .......... .......... ....... Total Tot al curr cu rrent ent assets ass ets .......... ............... ......... .... Property, plant, and equipment Equip Equ ipm m ent .......................................... .......................................... Less: Accumulated depreciation— equip equ ipmen mentt .......... ............... .......... .......... .......... .......

$ 26,000 30,500 29,000 3,500 3,500 $ 89,000 89,000 $146,000

Total Tot al assets ass ets ................................ ................................

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

45,000 45,000 101,000 $190,000

(For Instructor Use Only) 

5-39

PROBL PROBLEM EM 5-3 5-3A A (Cont inued) in ued) THE DELUXE STORE Balance Sheet Sheet (Cont (Continu inued) ed) November 30, 2014 Liabilit ies and and Owner’s Equity Current Current liabili ties  Acc  A cco o unts un ts payabl pay able e ........................................ ....................................................... ............... $25,200 Sales comm co mm issi is sion ons s payabl pay able.... e......... .......... .......... .......... .......... .......... .......... ..... 4,500 4,500 Proper Pro perty ty taxes tax es payabl pay able e .......... ............... .......... .......... .......... .......... .......... .......... ....... .. 2,500 2,500 Total Tot al curr cu rrent ent liabi li abilili ties ti es .......... ............... .......... ......... ......... .......... .......... ....... $ 32,200 32,200 Long-term liabilities Notes Not es payabl pay abl e ................................................ .............................................................. .............. 37,000 Total Tot al li abili abi liti ties es ......... .............. .......... .......... .......... .......... .......... .......... ......... ......... ....... 69,200 69,200 Owner’s Owner’s equit y Owner’ Own er’s s c apital api tal ............................................ ............................................................ ................ 120,800 Total liabil li abilit ities ies and owner’ ow ner’s s equity equi ty ...... ......... ...... ...... ...... ..... .. $190,0 $190,000 00

(b) Nov. Nov . 30

5-40

Depreciat Deprec iatio ion n Expens Exp ense e .......... ............... .......... .......... .......... .......  Ac cum cu m ulated ul ated Depreci Depr eciati ati on— on — Equi Equ i pment pm ent ...................................... ......................................

11,000 11,000

Insur Ins uranc ance e Expens Exp ense e .......... ............... .......... .......... .......... .......... ....... Prepaid Prepai d Insur Ins uranc ance e .......... ............... .......... .......... .......... .....

7,000 7,000

Proper Pro pertt y Tax Expens Exp ense e ......... .............. .......... .......... .......... ....... .. Proper Pro perty ty Taxes Payable Payabl e .......... ............... .......... .....

2,500 2,500

Sales Comm issi is sion ons s Expens e ...... ......... ...... ...... ...... ..... Sales Comm issi is sion ons s Payable ...... ......... ...... ...

4,500 4,500

Copyright © 2013 John Wiley & Sons, Inc.

11,000 7,000 7,000 2,500 2,500

Weygandt, Accounting Principles, 11/e, Solutions Manual

4,500 4,500

(For Instructor Use Only)

PROBL PROBLEM EM 5-3A 5-3A (Con (Conti tinu nued) ed) (c) Nov. Nov . 30

30

30 30

Sales Revenue Reven ue ......................................... ......................................... Int erest eres t Revenue Reven ue ..................................... ..................................... Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... ........ ...

700,000 8,000

Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... .......... .......... ....... Sales Sales Returns and  Al  A l low lo w ances anc es ................................... ................................... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ..... Salari es and Wages Expens Exp ense e ......... ......... Depreciat Deprec iatio ion n Expens Exp ense e .......... ............... .......... ....... Freig Fr eight ht-Out -Out ....................................... ....................................... Sales Comm issi is sion ons s Expens e ...... ......... ... Insur Ins uranc ance e Expens Exp ense e.......... ............... .......... .......... ....... Rent Expen Ex pense se ................................... ................................... Proper Pro perty ty Tax Expens Exp ense e.......... .............. ......... ....... .. Utili Uti li ties ti es Expens Exp ense e.......... ............... .......... .......... .......... ..... Interest Int erest Expens Exp ense e.......... ............... .......... .......... .......... .....

678,900 678,900

Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... .......... .......... ....... Owner’ Own er’s s Capital Capi tal .......... ............... .......... .......... .......... .......

29,100 29,100

Owner’ Own er’s s Capital Capi tal .......... ............... .......... .......... .......... .......... ......... .... Owner’ Own er’s s Drawin Draw ings gs .......... ............... .......... .......... ....... ..

10,000 10,000

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

708,000 708,000

8,000 507,000 507,000 96,000 96,000 11,000 11,000 6,500 11,00 11,000 0 7,000 7,000 15,000 2,500 2,500 8,500 8,500 6,400 6,400 29,100 29,100 10,000 10,000

(For Instructor Use Only) 

5-41

PROBLEM 5-4A

(a) Dat e  Apr  A pr.. 5 7 9 10

12 14

17 20

21

5-42

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Invent Inv entor ory y ............................................ .............................................. Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ........ ...

Ref . 120 201

Deb i t 1,200

Invent Inv entor ory y ............................................ .............................................. Cash ............................................. .............................................

120 101

50

Acco Ac coun unts ts Payable Payabl e.......... ............... .......... .......... .......... ....... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

201 120

100

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... ..... Sales Revenue Reven ue ............................ ............................

112 401

900

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ........ ... Invent Inv entor ory y .......... ............... .......... .......... ......... ......... ......... ....

505 120

540

Invent Inv entor ory y ............................................. ............................................. Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ........ ...

120 201

670

Acco Ac coun unts ts Payable ($1,20 ($1,200 0  – $100) ....   Inventory ($1,100 X 2%) ........................... ........................... Cash ............................................. .............................................

201

1,100

120 101

Acco Ac coun unts ts Payable Payabl e.......... ............... .......... .......... .......... ....... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

201 120

70

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... ..... Sales Revenue Reven ue ............................ ............................

112 401

610

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ........ ... Invent Inv entor ory y .......... ............... .......... .......... ......... ......... ......... ....

505 120

370

 – $70) ......... Acco Ac coun unts ts Payable ($670 ($670 –   Inventory ($600 X 1%) .............................. .............................. Cash ............................................. .............................................

201

600

Copyright © 2013 John Wiley & Sons, Inc.

J1 Cr ed i t 1,200 50 100 900 540 670

22 1,078 70 610 370

120 101

Weygandt, Accounting Principles, 11/e, Solutions Manual

6 594

(For Instructor Use Only)

PROBL PROBLEM EM 5-4A 5-4A (Con (Conti tinu nued) ed)

Dat e  Apr  A pr.. 27 30

A c c o u n t Ti t l es an d Ex p l an at i o n Sales Return Retu rns s an d Al A l low lo w ances anc es...... ...... Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ..... ..

Ref . 412 112

Deb i t 20

Cash ................................................ .................................................. Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ..... ..

101 112

900

J1 Cr ed i t 20 900

(b) Cash Date Date  Apr  A pr..

No. 101 1 7 14 21 30

Explanation Explanation Balance

Ref. J1 J1 J1 J1

Debit Debit

Credit 50 1,078 594

900

 Ac coun co unts ts Receivab Recei vable le Date Date  Apr  A pr.. 10 20 27 30

Explanation Explanation

Invent ory or y Date Date Explanation Explanation  Apr  A pr.. 1   Balance 5 7 9 10 12 14 17 20 21

Copyright © 2013 John Wiley & Sons, Inc.

Balance Balance 1,800 1,750 672 78 978 No. 112

Ref. J1 J1 J1 J1

Debit Debit 900 610

Credit

20 900

Ref.

Debit Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1

1,200 50

Credit Credit

100 540 670

Weygandt, Accounting Principles, 11/e, Solutions Manual

22 70 370 6

Balance Balance 900 1,510 1,490 590 No. 120 120 Balance Balance 2,500 3,700 3,750 3,650 3,110 3,780 3,758 3,688 3,318 3,312

(For Instructor Use Only) 

5-43

PROBL PROBLEM EM 5-4 5-4A A (Cont inued) in ued)  Acc  A cco o unts un ts Payable Payab le

No. 201

Date Expla xplana natio tion n  Apr.  Ap r. 5 9 12 14 17 21

Ref. J1 J1 J1 J1 J1 J1

Debit

Credit redit 1,200

100 670 1,100 70 600

Owner’ s Capital Date  Apr.  Ap r.

No. 301 301

Expla xplana natio tion n 1 B alance alan ce

Ref.

Sales Revenue Revenu e Date Expla xplana natio tion n  Apr.  Ap r. 10 20

Ref. J1 J1

Debit

Debit

Credit redit

Credit redit 900   610

Sales Sales Retur Returns ns and All owances Date Explana xplanation tion  Ap r. 27

Cost of Goods Sold Date Expla xplana natio tion n  Ap r. 10 20

5-44

Copyright © 2013 John Wiley & Sons, Inc.

Bala Balance nce 1,200 1,100 1,770 670 600 0

Bala Balance nce 4,300

No. 401 Bala Balanc nce e 900 1,510

No. 412 412 Ref. J1

Ref. J1 J1

Debit 20

Debit 540 370

Credit redit

Credit redit

Weygandt, Accounting Principles, 11/e, Solutions Manual

Bala Balance nce 20

No. 505 505 Bala Balance nce 540 910

(For Instructor Use Only)

PROBL PROBLEM EM 5-4A 5-4A (Con (Conti tinu nued) ed) (c)

ADAM’S ADAM’ S DISCOR DISCORAMA AMA Trial Balance  Apr  A prilil 30, 2014 Cash ............................................... ........................................................................ ...........................  Ac coun co untt s Receiv Rec eivabl able e .............................................. Inventory ................................................................. Owner’s Capital....................................................... Sales Revenue ........................................................ Sales Retur ns and Allo Al lowan wances ces .......... ............... .......... .......... .......... ..... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ........ ...

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

Deb i t $ 978 590   3,312

Cr ed i t

$4,300   1,510 20 910 $5,810

$5,810

(For Instructor Use Only) 

5-45

*PROBLEM 5-5A

 .    t   r   e   e    C    h    S   e   c   n   a  .    l   r   a    B    D

 .   r

   t    C   e   n   e   m  m   o   e   c    t   a   n   t    I    S  .

  r    D

 .   r   e    C   c

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   D

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   )   a    (

5-46

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   0    0    0  ,    2    1

Weygandt, Accounting Principles, 11/e, Solutions Manual

   0   0   0    0   0   0    8  ,    2  ,    0  ,    0   2   3    3    3    2    2

(For Instructor Use Only)

   7    4      5    )   y    l   n    O   e   s    U   r   o    t   c   u   r    t   s   n    I   r   o    F    (    l   a   u   n   a    M   s   n   o    i    t   u    l   o    S  ,   e    /    1    1

 ,   s   e    l   p    i   c   n    i   r    P   g   n    i    t   n   u   o   c   c    A

 ,    t    d   n   a   g   y   e    W  .   c   n    I  ,   s   n   o    S    &   y   e    l    i    W   n    h   o    J    3    1    0    2    ©    t    h   g    i   r   y   p   o    C

*PROBLEM *PROBLEM 5-5A 5-5A (Cont inued) in ued) (b)

VALDEZ VAL DEZ FASHION CENTER CENTER Income Incom e Statement Statement For t he Year Year End ed November Novem ber 30, 2014 2014

Sales revenues Sales revenu rev enue e .......................................... ............................................. ... Less: Sales Sales returns and and all ow ances anc es ....................................... ....................................... Net sales sal es ............................................ ...................................................... .......... Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... ......... .... Gros Gro s s prof pr ofii t .......................................... ........................................................ .............. Operating expenses Salari es and wages wag es expens exp ense e .......... .............. ....  Adv  Ad v erti ert i s ing in g expen ex pens s e ........................... ........................... Rent expens exp ense e ....................................... ....................................... Frei ght gh t -out -ou t ............................................ ............................................ Utili Uti li ties ti es expens exp ense e .......... ............... .......... .......... .......... ......... .... Maintenance Maintenan ce and repairs repair s expens e ..... ..... Depreciat Deprec iatio ion n expens exp ense e .......... ............... .......... .......... ..... Suppl Sup plies ies expens exp ense e .......... .............. ......... .......... .......... ........ ... Total operatin op eratin g expenses expens es ...... ......... ...... ... Incom Inc ome e from fr om operat op eratio ions ns ......... .............. .......... .......... .......... .......... ....... .. Other expenses and losses Interest Int erest expens exp ense e .......... ............... .......... .......... .......... .......... .......... ....... Net l oss os s .............................................. .............................................................. ................

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$755,200 8,800 746,400 497,700 497,700 248,700 $140,000 $140,000 24,400 24,000 16,700 14,000 14,000 12,10 12,100 0 11,500 11,500 4,200 4,200

Weygandt, Accounting Principles, 11/e, Solutions Manual

246,90 246,900 0 1,800 1,800 $

4,000 4,000 (2,200)

(For Instructor Use Only) 

5-47

*PROBLEM *PROBLEM 5-5A 5-5A (Conti nued) nu ed) VALDEZ VAL DEZ FASHION CENTER Owner’s Equity Statement For t he Year Year End ed November Novem ber 30, 2014 2014 Owner’ Own er’s s Capital Capi tal,, December Decemb er 1, 2013 ......... .............. .......... .......... ....... .. Less: Les s: Net Net l oss os s ............................................ ............................................................. ................. Draw in gs ............................................ .......................................................... .............. Owner’ Own er’s s Capital Capi tal,, Novemb Nov ember er 30, 2014 .......... ............... .......... ......... ....

$90,000 $90,000 $ 2,200 12,000

14,200 $ 75,800 75,800

VALDEZ VAL DEZ FASHION CENTER Balance Sheet November 30, 2014  As set s Current assets Cash ............................................ .................................................. ......  Acc  A ccou oun n ts receiv rec eivabl able e ........................ ........................ Invent Inv entor ory y ........................................... ........................................... Suppl Sup pl i es ............................................ ............................................ Total Tot al curr cu rrent ent assets ass ets .......... ............... ....... .. Property, Property, p lant, and equipment Equi Equ i pm ent ......................................... .........................................  Acc  A ccum um ul ated deprec dep rec iati iat i on— on — equip equ ipm m ent ..................................... ..................................... Tot al assets ass ets ............................... ...............................

5-48

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$

8,700 30,700 44,400 2,000 $ 85,800 85,800

$133,000 39,500

Weygandt, Accounting Principles, 11/e, Solutions Manual

93,500 $179,300

(For Instructor Use Only)

*PROBLEM *PROBLEM 5-5A 5-5A (Cont inued) in ued) VALDEZ VAL DEZ FASHION CENTER Balance Sheet Sheet (Cont (Continu inued) ed) November 30, 2014 Liabiliti es and and Owner’s Owner’s Equity Current Current liabili ties Notes Not es payabl pay able e (due (du e next nex t year) ......... .............. .......... .......... .......... .......... .....  Ac coun co untt s p ayabl ayab l e ............................................. ...................................................... ......... Interes Int erestt payabl pay abl e ............................................ ......................................................... ............. Total Tot al curr cu rrent ent li abili abi liti ti es .......... ............... .......... .......... .......... .......... ......... .... Long-term liabilities Notes Not es payabl pay abl e ................................................ ............................................................ ............ Total Tot al li abili abi liti ties es .......... ............... .......... .......... .......... .......... .......... .......... .......... ....... .. Owner’s Owner’s equity Owner’ Own er’ s capit cap it al ............................................ .......................................................... .............. Total liabil li abilit ities ies and owner’ ow ner’ s equity equi ty ...... ......... ...... ...... ...... .....

(c) Nov. No v. 30 30

30 30

$20,000 $20,000 48,500 4,000 $ 72,500 72,500 31,000 103,500 103,500 75,800 $179, $179,300 300

Suppl Sup plies ies Expens Exp ense e .......... ............... .......... .......... .......... .......... ....... Suppl Sup pl i es ............................................ ............................................

4,200 4,200

Depreciat Deprec iatio ion n Expens Exp ense e.......... ............... .......... .......... .......... .....  Acc  A cc umul um ul ated Depreci Depr eciati ation on— — Equi Equ i pm ent ..................................... .....................................

11,500 11,500

Interes Int erestt Expens Exp ense e .......... ............... .......... .......... .......... .......... ........ ... Interes Int erestt Payable Payabl e .......... ............... .......... .......... .......... ....... ..

4,000 4,000

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... ......... .... Inv ento ent o ry ........................................... ...........................................

300

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4,200

11,500 4,000 4,000 300

(For Instructor Use Only) 

5-49

*PROBLEM *PROBLEM 5-5A 5-5A (Conti nued) nu ed) (d) Nov. Nov . 30 30

30 30

5-50

Sales Revenue Reven ue ....................................... ....................................... Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... ....... ..

755,200

Incom Inc ome e Summar Sum mary y .......... ............... .......... ......... ......... .......... ....... Sales Sales Returns and  Al l owanc ow ances es ................................. ................................. Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... ........ ... Salari es and Wages Expens Exp ense e ....... .......  Adv  Ad v ert is ing in g Ex pense pen se ..................... ..................... Utili Uti li ties ti es Expens Exp ense e .......... ............... .......... .......... ........ ... Maint Maintenance enance and Repairs Repairs Exp ense ens e ...................................... ...................................... Frei ght gh t -Out ..................................... ..................................... Rent Exp ense ens e ................................. ................................. Suppl Sup plies ies Expens Exp ense e .......... ............... .......... .......... ....... Depreciat Deprec iatio ion n Expens Exp ense e .......... ............... ......... .... Interes Int erestt Expens Exp ense e .......... ............... .......... .......... ........ ...

757,400 757,400

Owner’ Own er’s s Capital Capi tal .......... ............... .......... .......... .......... .......... ....... .. Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... ....... ..

2,200 2,200

Owner’ Own er’s s Capital Capi tal .......... ............... .......... .......... .......... .......... ....... .. Owner’ Own er’s s Drawi ngs........ ng s............. .......... .......... ........ ...

12,000 12,000

Copyright © 2013 John Wiley & Sons, Inc.

755,200 755,200

8,800 497,700 497,700 140,000 140,000 24,400 14,000 14,000 12,100 16,700 24,000 4,200 4,200 11,500 11,500 4,000 4,000 2,200 2,200

Weygandt, Accounting Principles, 11/e, Solutions Manual

12,000 12,000

(For Instructor Use Only)

*PROBLEM *PROBLEM 5-5A 5-5A (Cont inued) in ued) (e)

VAL DEZ FASHION FA SHION CENTER Post-Closing Trial Balance November 30, 2014 Cash ............................................... ................................................................. .................. Accou nts Receivable Receivable...................................... ...................................... Inventory ......................................................... Suppl Sup pl ies ................................................ ........................................................... ........... Equipment .......................................................  Ac cum cu m ulated ul ated Depreci Depr eci ation ati on—Equ —Equii pment pm ent ...... Notes Payable .................................................  Ac coun co untt s Payabl Pay able e ........................................... ........................................... Interest Payable .............................................. Owner’ Own er’s s Capital Capi tal..... .......... .......... .......... .......... .......... .......... .......... .......... ....... ..

Debit $ 8,700   30,700   44,400   2,000   133,000

$218,800

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

Credit

$ 39,500   51,000   48,500   4,000   75,800 $218,800

(For Instructor Use Only) 

5-51

*PROBLEM 5-6A DAYTON DEPARTMENT STORE Income Incom e Statement Statement (Partial) (Partial) For t he Year Year End ed November Novem ber 30, 2014 2014 Sales Sales revenues Sales revenu rev enue e ............................ ............................ Less: Sales Sales returns and and allow all owanc ances es .......... ............... .......... ....... .. Net s ales .................................... .................................... Cost of goods sold Invent Inv entor ory, y, Dec. 1, 2013......... .............. ..... Purc Pur c hases has es .................................. .................................. Less: Purchase returns and allow all owanc ances es .......... .............. .... Purchase Purc hase disc di scou ount nts s ...... ...... Net purc pu rchas hases es .......... ............... .......... .......... ....... ..  Add  A dd:: Frei ght-i gh t-i n ......................... ......................... Cost of good go ods s purc pu rchased hased ...... ......... ... Cost of g oods available available for fo r s ale ........................... ........................... Invent Inv entor ory, y, Nov. Nov . 30, 2014 ......... ........... .. Cost of good go ods s sold so ld ...... ........ .. Gross Gro ss prof pr ofit it .......... ............... .......... .......... .......... .......... ........ ...

5-52

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$1,000,000 20,000 20,000 980,000 $ 40,000 40,000 $585,000 $2,700 $2,700 6,300 6,300

9,000 9,000 576,000 576,000 7,500 583,5 583,500 00 623,500 52,600 52,600

Weygandt, Accounting Principles, 11/e, Solutions Manual

570,90 570,900 0 $ 409,100 409,100

(For Instructor Use Only)

*PROBLEM 5-7A

(1) (1)

(a) (a)

Cost of goods goo ds sold sol d = Sales Sales revenue – Gross profi pro fitt = $55,000 – $38,300 = $16,700

(b)

Net Net income inc ome = Gross profit pro fit – Operatin Operating g expenses = $38,300 – $34,900 = $3,400

(c)

Invent ory or y = 2011 2011 Inventor Invent ory y + Purchases Purc hases – CGS = $7,200 + $14,200 – $16,700 = $4,700

(d)

Cash Cash payments to suppliers supp liers = 2011 2011 Account Acc ounts s payable + Purchases – 2012 Accounts payable = $3,200 + $14,200 – $3,600 = $13,800

(e) (e)

Sales Sales revenue = Cost of goods goo ds sold sol d + Gross profit pro fit = $13,800 + $35,200 = $49,000

(f)

Operatin Operating g expenses = Gross profit pro fit – Net Net income inc ome = $35,200 – $2,500 = $32,700

(g)

2012 2012 Invent ory or y + Purchases Purc hases – 2013 2013 Invent ory or y = CGS Purchases Purc hases = CGS – 2012 2012 Invent ory or y + 2013 2013 Inv Invento entory ry = $13,800 $13,800 – $4,700 $4,700 [from [fr om (c)] + $8,100 $8,100 = $17,200

(h)

Cash Cash payments to suppli sup pli ers = 2012 2012 Acc ounts oun ts payable + Purchases – 2013 Accounts Payable = $3,600 + $17,200 [from (g)] – $2,500 = $18,300

(i)

Gross profit pro fit = Sales Sales revenue – CGS CGS = $47,000 – $14,300 = $32,700

(j)

Net Net income inc ome = Gross profit pro fit – Operatin Operating g expenses = $32,700 $32,700 [fr om (i)] – $28,600 $28,600 = $4,100 $4,100

(k)

2013 2013 Invent ory or y + Purchases Purc hases – 2014 2014 Invent ory or y = CGS Inventor y = 2013 2013 Inventory + Purchases – CGS CGS = $8,100 + $13,200 – $14,300 = $7,000

(I) (I)

Acc ounts oun ts payable = 2013 2013 Acc ounts oun ts payable + Purchases Purch ases – Cash Cash payments p ayments = $2,500 + $13,200 – $13,600 = $2,100

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only) 

5-53

*PROBLEM *PROBLEM 5-7A 5-7A (Conti nued) nu ed) (2) (2) A decline in sales sales does does not necessarily necessarily mean that profit ability declined. Profitability is affected by sales revenue, cost of goods sold, and operating expenses. If cost of goods sold or operating expenses decline more than sales revenue, profitability can increase even when sales decline. In this particular case, the sales revenue decline was offset by cost savings to improve profitability. Therefore, profitability increase inc reased d for f or Alana Al ana,, Inc. fro m 2012 2012 to 2014 2014.. 2012 Gross Gros s prof pr ofit it rate Prof it marg in

5-54

2013

2014

$38,30 $38,300 0 ÷ $55,00 $55,000 0 $35,200 ÷ $49,000 $32,700 ÷ $47,000 = 69.6% = 71.8% = 69.6% $3,400 $3,400 ÷ $55,00 $55,000 0 = 6.2%

Copyright © 2013 John Wiley & Sons, Inc.

$2,500 ÷ $49,000 = 5.1%

$4,100 ÷ $47,000 = 8.7%

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

*PROBLEM 5-8A (a) Dat e  Apr  Ap r . 5 7 9 10 12 14

17 20 21

27 30

General Journal A c c o u n t Ti t l es an d Ex p l an at i o n Purc Pur c hases has es ................................................ ...................................................... ......  Acc  A cc ount ou nts s Payabl Pay abl e ............................... ................................. ..

Deb i t 1,200

 1,200

Frei ght-In gh t-In .............................................. ....................................................... ......... Cash .............................................. ........................................................ ..........

50

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ....... Purchase Purch ase Returns Returns and Allow Al lowances ances .... ......

100

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ....... Sales Revenue .......................................

600

Purc Pur c hases has es ............................................... ...................................................... .......  Acc  A cc ount ou nts s Payabl Pay abl e ............................... ................................. ..

450

Acco Ac coun unts ts Payable ($1,20 ($1,200 0 – $100) $100) ...... ......... ...... ...... ... Purchase Discounts ($1,100 X 2%) ....... Cash ($1,100 – $22) ........................... ............................... ....

1,100

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ....... Purchase Purc hase Retur Returns ns and Allo Al lowances wances ..... ....... ..

50

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ....... Sales Revenue .......................................

600

Acco Ac coun unts ts Payable ($450 ($450 – $50)..... $50)........ ...... ...... ...... ...... ... Purchase Disco Disco unts ($400 X 1%) ....................................... ....................................... Cash ($400 – $4) ................................. .................................... ...

400

Sales Retu Return rns s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ..... ..  Acc  A cc ount ou nts s Rec eivabl eiv able e ............................ ............................

35

Cash ................................................ ............................................................... ...............  Acc  A cc ount ou nts s Rec eivabl eiv able e ............................ ............................

600

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

Cr ed i t

50 100 600 450 22  1,078 50 600

4 396 35  600

(For Instructor Use Only) 

5-55

*PROBLEM *PROBLEM 5-8A 5-8A (Conti nued) nu ed) (b) 4/1 Bal . 4/30

Cash Cash 3,000 4/7 600 4/14 4/21 2,076 2,076

4/30 Bal. Bal .    Acc  A ccou ount nt s Receiv Rec eiv able abl e 4/10 600 4/27 4/20 600 4/30 4/30 4/30 Bal. 565 565

50 1,078 396

35 600

7,000 7,000 7,000

Sales Revenue Revenu e 4/10 4/ 4/20 4/30 Bal. Bal .

600 600 1,200

Sales Sales Retur Returns ns and All owances 4/27 35 4/30 B al . 35

In v en t o r y 4,000 4,000 4,000

4/1 Bal. Bal . 4/30 Bal. Bal .    Ac coun co untt s Payabl Pay able e 4/9 100 4/5 4/14 1,100 4/12 4/17 50 4/21 400 4/30 B al .

Owner’s Capit Capital al 4/1 Bal. Bal . 4/30 Bal. Bal .

1,200 450 0

Purch Pur chases ases 4 /5 4/ 1,200 4/12 450 4/30 Bal. Bal. 1,650 4/7 4/30 B al .

Freigh Frei ght-In t-In 50 50

Purchase Return Returns s and Allo wances 4/9 100 4/17 50 4/30 Bal. Bal . 150 Purchase Discou Discou nts 4/14 4/21 4/30 Bal. Bal .

5-56

Copyright © 2013 John Wiley & Sons, Inc.

22 4 26

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only)

*PROBLEM *PROBLEM 5-8A 5-8A (Cont inued) in ued) (c)

KOKOTT KOK OTT PRO SHOP Trial Balance  Apr  A prilil 30, 2014 Cash ............................................... ....................................................................... ........................ Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... .......... .......... .......... ........ ... Invent Inv entor ory y ............................................. ............................................................... .................. Owner’ Own er’s s Capit Capi t al ............................................... .................................................... ..... Sales Revenue Reven ue ................................................ ...................................................... ...... Sales Returns Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ...... ...... ...... ... Purch Pur chases ases ................................................. ............................................................. ............ Purchase Purc hase Returns Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ...... ... Purch Pur chase ase Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... ..... Frei ght-In gh t-In ................................................. ............................................................... ..............

(d)

Deb i t $2,076   565 4,000

Cr ed i t

$7,000   1,200 35 1,650 150 26 50 $8,376

$8,376

KOKOTT PRO SHOP Income Statement Statement (Partial) (Partial) For th e Month Ended Apr il 30, 30, 2014 2014

Sales Sales revenues Sales revenu rev enue e ................................ ................................ Less: Sales Sales returns and and allow all owanc ances es .......... ............... .......... .......... ....... Net sales sal es ......................................... ......................................... Cost of goods sold Invent Inv entor ory, y, Apri Ap rill 1 .......... ............... .......... .......... ....... .. Purch Pur chases ases ...................................... ...................................... Less: Purchase returns and allow all owanc ances es .......... ............... ........ ... Purc hase disc di scou ount nts s ...... ......... ..... .. Net purc pu rchas hases es .......... ............... .......... .......... .......... ....... ..  Add:  Ad d: Frei ght gh t -in .............................. .............................. Cost of goods goo ds purchased pur chased ......... .............. ....... Cost of g oods available available for fo r s ale ........................................ ........................................ Invent Inv entor ory, y, Apri Ap rill 30 .......... ............... .......... .......... ..... Cost of good go ods s sold so ld ...... ......... ...... ...... ..... .. Gross Gro ss prof pr ofit it .......... ............... .......... ......... ......... .......... .......... ......... ....

Copyright © 2013 John Wiley & Sons, Inc.

$1,200 35 1,165 $4,000 $4,000 $1,650 $150 26

176 176 1,474 1,474 50

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,524 1,524 5,524 4,824 4,824 700 700 $ 465

(For Instructor Use Only) 

5-57

SOLUTIONS TO PROBL PROBLEMS EMS PROBLEM 5-1B

(a) J ul y 1 3

9

12

17

18

20 21

5-58

Inv entor ent or y .............................................. ......................................................... ...........  Acc  A cc ount ou nts s Payabl Pay abl e .................................. ..................................

1,800

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ....... .. Sales Revenu Reven u e ........................................ ........................................

2,000 2,000

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ......... .... Inv entor ent or y ............................................. ................................................. ....

1,200 1,200

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ....... .. Inventory ($1,800 X .02) ...................................... ...................................... Cash ................................................ ........................................................ ........

1,800 1,800

Cash ................................................ ................................................................ ................ Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... ......... ......... .......... .......  Acc  A cc ount ou nts s Rec eivabl eiv able e ............................. .............................

1,980 20

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ....... .. Sales Revenu Reven u e ........................................ ........................................

1,800 1,800

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ......... .... Inv entor ent or y ............................................. ................................................. ....

1,080 1,080

Invent Inv entor ory y ............................................... ......................................................... ..........  Acc  A cc ount ou nts s Payabl Pay abl e .................................. ..................................

1,900

Invent Inv entor ory y ............................................. ......................................................... ............ Cash ................................................ ........................................................ ........

125

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ....... .. Inv entor ent or y ............................................. ................................................. ....

300

Cash ................................................ ................................................................ ................ Sales Disco Dis coun unts ts .......... ............... .......... .......... .......... ......... ......... .......... .......  Acc  A cc ount ou nts s Rec eivabl eiv able e ............................. .............................

1,782 18

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,800 2,000 1,200

36 1,764

2,000 1,800 1,080 1,900 125 300

1,800 (For Instructor Use Only)

PROBL PROBLEM EM 5-1B 5-1B (Con (Conti tinu nued) ed) July Ju ly 22

30 31

Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... .......... .......... ....... Sales Revenue Reven ue ....................................... .......................................

2,250 2,250

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ......... .... Invent Inv entor ory y ............................................. ................................................ ...

1,350 1,350

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ....... Cash ............................................. ........................................................ ...........

1,600 1,600

Sales Sales Retur Returns ns and Allow Al lowances ances .......... ............... .......... ....... ..  Ac coun co untt s Receiv Rec eivabl abl e............................. e.............................

200

Invent Inv entor ory y ............................................. ........................................................ ........... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......

120

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

2,250 1,350 1,600 200

(For Instructor Use Only) 

120

5-59

PROBLEM 5-2B

(a) Dat e  Apr  Ap r . 2 4

5 6 11

13

14 16 18 20

5-60

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Invent Inv entor ory y ............................................ .............................................. Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ........ ...

Ref . 120 201

Deb i t 6,900

Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... ..... Sales Revenue Reven ue ............................ ............................ Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... ........ ... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

112 401 505 120

6,500

Frei ght gh t -Out .......................................... .......................................... Cash ............................................. .............................................

644 101

240

Acco Ac coun unts ts Payable Payabl e.......... ............... .......... .......... .......... ....... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

201 120

500

Accou Ac counts nts Payable Payable ($6, ($6,90 900 0 – $500 $500)) ..... ....... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ... ($6,400 X 1%) Cash ............................................. .............................................

201 120

6,400

Cash .................................................. ..................................................... ... Sales Disco Dis coun unts ts ($6,500 ($6,500 X 1%) .......... ..........  Ac coun co untt s Receiv Rec eivabl able e ..................

101 414 112

6,435 65

Invent Inv entor ory y ............................................. ............................................. Cash ............................................. .............................................

120 101

3,800

Cash ................................................... ..................................................... .. Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ........ ...

101 120

500

Invent Inv entor ory y ............................................. ............................................. Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ........ ...

120 201

4,500

Invent Inv entor ory y ............................................. ............................................. Cash ............................................. .............................................

120 101

100

Copyright © 2013 John Wiley & Sons, Inc.

J1 Cr ed i t 6,900 6,500

3,900 3,900 240 500 64

101

6,336

6,500 3,800 500

Weygandt, Accounting Principles, 11/e, Solutions Manual

4,500 100

(For Instructor Use Only)

PROBL PROBLEM EM 5-2B 5-2B (Con (Conti tinu nued) ed)

Dat e  Apr  Ap r . 23

26 27

29

30

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Cash .................................................... .................................................... Sales Revenue Reven ue ............................ ............................ Cost of Goods Sold............................ Sold ............................ Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ....... ..

Ref . 101 401 505 120

Deb i t 7,400

Invent Inv entor ory y ............................................. ............................................. Cash ............................................. .............................................

120 101

2,300

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... ..... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ....... .. ($4,500 X 2%) Cash ............................................. .............................................

201 120

4,500

Sales Sales Retur Returns ns and All owances .... ...... .... .... Cash ............................................. ............................................. Inventory ............................................. Cost of Goods Good s Sold ..... ........ ...... ...... ...... ...... ...

412 101 120 505

90

Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ...... ...... ...... ...... ..... Sales Revenue Reven ue ............................ ............................ Cost of Goods Sold............................ Sold ............................ Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ....... ..

112 401 505 120

3,700

Copyright © 2013 John Wiley & Sons, Inc.

7,400 4,120 4,120 2,300 90

101

Weygandt, Accounting Principles, 11/e, Solutions Manual

J1 Cr ed i t

4,410 90 30 30 3,700 2,800 2,800

(For Instructor Use Only) 

5-61

PROBL PROBLEM EM 5-2 5-2B B (Cont inued) in ued) (b) Cash Date Date  Apr.  Ap r.

No. 101 1 5 11 13 14 16 20 23 26 27 29

Explanation Balance

Ref. Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit Debit

Credit Credit   240 6,336

6,435 3,800 500 100 7,400 2,300 4,410 90

 Acc  A ccou ount nt s Receiv Rec eiv able abl e Date Date  Apr.  Ap r.

Explanation 4 13 30

No. 112 Ref. Ref. J1 J1 J1

Debit Debit 6,500

Credit Credit 6,500

3,700

Inventory Inventor y Date  Apr.  Ap r.

5-62

Balance 9,000   8,760   2,424   8,859   5,059   5,559   5,459 12,859   10,559   6,149   6,059

Balance 6,500 0   3,700 No. 120 120

Explanation xplanation 2 4 6 11 14 16 18 20 23 26 27 29 30 Copyright © 2013 John Wiley & Sons, Inc.

Ref. Ref. J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

Debit Debit 6,900

Credit 3,900 500 64

3,800 500 4,500 100 4,120 2,300 90 30 2,800

Weygandt, Accounting Principles, 11/e, Solutions Manual

Balance Balance 6,900   3,000   2,500   2,436   6,236   5,736   10,236   10,336   6,216   8,516   8,426   8,456   5,656 (For Instructor Use Only)

PROBL PROBLEM EM 5-2B 5-2B (Con (Conti tinu nued) ed)  Ac coun co untt s Payabl Pay able e Dat e  Apr  A pr..

No. 201

Ex p l an at i o n

Ref . J1 J1 J1 J1 J1

2 6 11 18 27

Deb i t

Cr ed i t 6,900

500 6,400 4,500 4,500

Owner’s Owner’ s Capi Capital tal Dat e  Apr  A pr..

1

No. 301

Ex p l an at i o n B alanc alan c e

Ref .

Deb i t

Cr ed i t

Sales Revenue Revenu e Dat e  Apr  A pr..

Ref . J1 J1 J1

4 23 30

Deb i t

Cr ed i t 6,500 7,400 3,700

Sales Sales Retur Returns ns and All owances Explana xplanation tion

Ex p l an at i o n

Ref. J1

Debit 90

Credit redit

Ex p l an at i o n 4 23 29 30

Copyright © 2013 John Wiley & Sons, Inc.

Bala Balance nce 90 No. 414 414

Ref . J1

Deb i t 65

Cr ed i t

Cost of Goods Sold Dat e  Apr  A pr..

B al an c e 6,500 13,900 17,600 No. 412 412

Sales Sales Discount Disco unts s Dat e  Apr  A pr.. 13

B al an c e 9,000 No. 401

Ex p l an at i o n

Date  Apr  A pr.. 29

B al an c e 6,900   6,400 0   4,500 0

B al an c e 65 No. 505 505

Ref . J1 J1 J1 J1

Deb i t 3,900 4,120

Cr ed i t

30 2,800

Weygandt, Accounting Principles, 11/e, Solutions Manual

B al an c e 3,900   8,020   7,990 10,790

(For Instructor Use Only) 

5-63

PROBL PROBLEM EM 5-2 5-2B B (Cont inued) in ued) Freigh t-Out Date  Apr.  Ap r. 5

(c)

No. 644

Explanation Explanation

Ref. Ref. J1

Debit Debit 240

Credit

ROSE DISTRIBUTING COMPANY Income Incom e Statement Statement (Partial) (Partial) For the t he Month Ended Apr il 30, 30, 2014 2014 Sales Sales revenues Sales revenu rev enue e ............................................. ..................................................... ........ Less: Less : Sales return retu rns s and allowanc allo wances es ...... ......... ...... ...... ..... Sales disc di scou ount nts s .......... ............... ......... ......... .......... .......... .......... ..... Net s ales .............................................. .............................................................. ................ Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... .......... ........ ... Gross Gro ss prof pr of i t ............................................. ................................................................. ....................

5-64

Balance Balance 240

Copyright © 2013 John Wiley & Sons, Inc.

$17,600 $90 $90 65

Weygandt, Accounting Principles, 11/e, Solutions Manual

155 17,445 10,790 10,790 $ 6,655

(For Instructor Use Only)

PROBLEM 5-3B

(a)

MACKEY MA CKEY DEPARTMENT STORE Income Incom e Statement Statement For the th e Year Year Ended End ed December 31, 31, 2014 2014

Sales Sales revenues Sales revenu rev enue e ..................................... ..................................... Less: Sales Sales returns and and allow all owanc ances es ......... .............. .......... .......... .......... ....... .. Net sales sal es ............................................ .............................................. .. Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... ....... Gross Gro ss prof pr ofit it ......... .............. .......... .......... .......... .......... .......... .......... ......... .... Operating expenses Salaries and wages expense expens e ..... ..... Depreciat Deprec iatio ion n expens exp ense e ......... .............. ........ ... Sales comm co mmis issi sion ons s expens e ...... ...... Utili Uti li ties ti es expens exp ense e .......... ............... .......... .......... ....... Insur Ins uranc ance e expens exp ense e .......... ............... .......... ....... .. Proper Pro perty ty tax expens exp ense e .......... ............... ........ ... Total operatin op eratin g expenses expens es .... .... Incom Inc ome e from fr om operat op eratio ions ns .......... ............... .......... .......... ........ ... Other revenues and and gains gain s Interest Int erest revenu rev enue e .......... ............... .......... .......... .......... ......... .... Other expenses and losses Interes Int erestt expens exp ense e ................................. ................................. Net i ncom nc om e ............................................. ................................................. ....

Copyright © 2013 John Wiley & Sons, Inc.

$728,000 8,000 8,000 720,000 412,700 412,700 307,300 307,300 $108,0 $108,000 00 23,700 23,700 14,500 14,500 12,000 12,000 7,200 7,200 4,800 4,800

Weygandt, Accounting Principles, 11/e, Solutions Manual

170,2 170,200 00 137,100 137,100 4,000 4,000 12,000

8,000 $ 129,100

(For Instructor Use Only) 

5-65

PROBL PROBLEM EM 5-3 5-3B B (Cont inued) in ued) MACKEY MACK EY DEPARTMENT STORE Owner’s Equity Statement For the th e Year Year Ended End ed December 31, 2014 2014 Owner’ Own er’s s Capital Capi tal,, Januar Jan uary y 1 .......... ............... .......... .......... .......... .......... .......... .......... .......... .......... ......... ....  Add  A dd:: Net i nc ome om e ............................ .................................................. ............................................. .........................

$176,600 $176,600 129,100 305,700 28,000 $277,700 $277,700

Less: Les s: Draw ings in gs ............................................ ................................................................... ................................. .......... Owner’ Own er’s s Capital Capi tal,, December Decemb er 31 .......... ............... .......... .......... .......... .......... .......... .......... .......... ........ ...

MACKEY MACK EY DEPARTMENT STORE Balance Sheet December Decemb er 31, 2014  As set s Current assets Cash ............................................ ..................................................... .........  Acc  A ccou oun n ts receiv rec eivabl able e ........................... ........................... Invent Inv entor ory y ............................................. ............................................... Prepaid Prep aid insu in suran rance ce .......... ............... .......... .......... .......... ....... Total Tot al curr cu rrent ent assets ass ets ......... .............. ......... ...... .. Property, Property, p lant, and equipment Buil Bu ildi ding ngs s .......... .............. ......... .......... .......... .......... .......... .......... ....... .. Less: Accumulated depreciation— buil bu ildi ding ngs s .......... .............. ......... .......... .......... .......... ....... Equi Equ i pm ent ........................................... ............................................. Less: Accumulated depreciation— equi equ i pment pm ent ................................. ................................. Tot al assets ass ets .................................. ..................................

5-66

Copyright © 2013 John Wiley & Sons, Inc.

$ 23,800 50,300 75,000 2,400 2,400 $151,500 $151,500 $290,000 $290,000 52,500 52,500 110,000

237,500 237,500

42,900

67,100

Weygandt, Accounting Principles, 11/e, Solutions Manual

304,600 $456,100

(For Instructor Use Only)

PROBL PROBLEM EM 5-3B 5-3B (Con (Conti tinu nued) ed) MACKEY MACK EY DEPARTMENT STORE Balance Sheet Sheet (Cont (Continu inued) ed) December Decemb er 31, 2014 2014 Liabiliti es and and Owner’s Owner’s Equity Current Current liabili ties  Ac coun co untt s p ayabl ayab l e ................................................ ..................................................... ..... $ 80,300 Mortg Mor tgage age payabl pay able e (due (du e next nex t year) .......... ............... .......... .......... ....... .. 25,000 25,000 Interes Int erestt p ayabl ayab l e ............................................... ........................................................ ......... 9,000 Proper Pro pertt y taxes tax es payabl pay able e .......... ............... .......... .......... .......... .......... .......... ......... .... 4,800 4,800 Sales comm co mmis issi sion ons s payabl pay able e ......... .............. .......... .......... .......... .......... ....... .. 4,300 4,300 Total Tot al curr cu rrent ent li abili abi liti ti es .......... ............... .......... .......... .......... .......... ........ ... $123,400 $123,400 Long-term liabilities Mortg Mor tgage age payabl pay able e ................................................ ..................................................... ..... 55,000 Total Tot al li abili abi liti ties es .......... ............... .......... .......... .......... .......... .......... .......... .......... ....... 178,400 178,400 Owner’s Owner’s equity Owner’ Own er’ s capit cap it al ............................................ ......................................................... ............. 277,700 Total liabil li abilit ities ies and owner’ ow ner’ s equity equi ty ...... ......... ...... ...... ...... ... $456, $456,100 100

(b) Dec. 31

31 31 31

Depreciat Deprec iatio ion n Expens Exp ense e .......... ............... .......... .......... .......... .....  Ac cum cu m ulated ul ated Depreci Depr eciati ati on— on — Buil Bu il ding di ngs s .......... ............... .......... .......... .......... .......... ......... ....  Ac cum cu m ulated ul ated Depreci Depr eciati ati on— on — Equi Equ i pment pm ent ..................................... .....................................

23,700 23,700

Insur Ins uranc ance e Expens Exp ense e.......... ............... .......... .......... .......... .......... ..... Prepaid Prepai d Insur Ins uranc ance e .......... ............... .......... .......... ........ ...

7,200 7,200

Interes Int erestt Expens Exp ense e.......... ............... .......... .......... .......... .......... ......... .... Interes Int erestt Payabl e .......... ............... .......... .......... .......... ....... ..

9,000 9,000

Proper Pro perty ty Tax Expens Exp ense e.......... ............... .......... .......... .......... ..... Proper Pro pertt y Taxes Payable Payabl e .......... ............... ......... ....

4,800 4,800

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 11/e, Solutions Manual

10,400 10,400 13,300 7,200 7,200 9,000 9,000 4,800 4,800

(For Instructor Use Only) 

5-67

PROBL PROBLEM EM 5-3 5-3B B (Cont inued) in ued) 31 31 (c) Dec. 31

31

31 31

5-68

Sales Comm issi is sion ons s Expens e ...... ......... ...... ...... ... Sales Comm issi is sion ons s Payable ...... ......... ...

4,300 4,300

Utili Uti liti ti es Expens Exp ense e .......... ............... .......... .......... .......... .......... .......  Acc  A cc ount ou nts s Payabl Pay able e .......................... ..........................

1,000 1,000

Sales Revenue Reven ue ....................................... ....................................... Interes Int eres t Revenue Reven ue .................................... .................................... Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... ....... ..

728,000 4,000

Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... .......... .......... ..... Sales Retur Returns ns and Allo Al lowances wances ...... ...... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... ......... .... Salari es and Wages Expens Exp ense e........ ........ Sales Comm issi is sion ons s Expens e ...... ........ Proper Pro perty ty Tax Expens Exp ense e ......... .............. .......... ..... Utili Uti liti ti es Expens Exp ense e .......... ............... .......... .......... ........ ... Depreciat Deprec iatio ion n Expens Exp ense e.......... ............... .......... ..... Insur Ins uranc ance e Expens Exp ense e .......... ............... .......... ......... .... Interest Int erest Expens Exp ense e .......... ............... .......... .......... ........ ...

602,900 602,900

Incom Inc ome e Summar Sum mary y .......... ............... .......... .......... .......... .......... ..... Owner’ Own er’s s Capital Capi tal .......... ............... .......... ......... ......... .......

129,100 129,100

Owner’ Own er’s, s, Capit al .......... ............... .......... .......... .......... .......... ....... .. Owner’ Own er’s s Drawi ngs ng s .......... ............... .......... ......... ...... ..

28,000 28,000

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4,300 4,300 1,000

732,000 732,000 8,000 8,000 412,700 412,700 108,000 108,000 14,500 14,500 4,800 4,800 12,000 12,000 23,700 23,700 7,200 7,200 12,000 12,000 129,100 129,100

Weygandt, Accounting Principles, 11/e, Solutions Manual

28,000 28,000

(For Instructor Use Only)

PROBLEM 5-4B (a) Dat e  Apr  Ap r . 4 6 8

10 11 13

14 15 17 18

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Invent Inv entor ory y ............................................... ............................................... Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ......... ....

Ref . 120 201

Deb i t 840

Invent Inv entor ory y ............................................... ............................................... Cash ............................................ .............................................. ..

120 101

40

Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ...... ...... ...... ...... ...... ... Sales Revenue Reven ue .............................. ..............................

112 401

1,150

Cost of Goods Sold ............................. Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ......... ....

505 120

790

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... ....... .. Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ......... ....

201 120

40

Invent Inv entor ory y ............................................... ............................................... Cash .............................................. ..............................................

120 101

420

Acco Ac coun unts ts Payable ($840 ($840 – $40).... $40)....... ...... ..... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ......... .... ($800 X 2%) Cash .............................................. ..............................................

201 120

800

Invent Inv entor ory y ............................................... ............................................... Acco Ac coun unts ts Payable Payabl e .......... ............... .......... ......... ....

120 201

900

Cash ................................................ ...................................................... ...... Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ......... ....

101 120

50

Invent Inv entor ory y ............................................... ............................................... Cash .............................................. ..............................................

120 101

30

Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... ....... .. Sales Revenue Reven ue .............................. ..............................

112 401

900

Cost of Goods Sold ............................. Invent Inv entor ory y .......... ............... .......... .......... .......... .......... ......... ....

505 120

540

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840 40 1,150 790 40 420 16

101

Weygandt, Accounting Principles, 11/e, Solutions Manual

J1 Cr ed i t

784 900 50 30 900 540 (For Instructor Use Only) 

5-69

PROBL PROBLEM EM 5-4 5-4B B (Cont inued) in ued)

Dat e  Apr  Ap r . 20 21

27 30

General General Journal Jou rnal A c c o u n t Ti t l es an d Ex p l an at i o n Cash .............................................. ...................................................... ........ Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ...... ...... .....

Ref . 101 112

Deb i t 600

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... ....... .. Invent Inv entor ory y ($900 ($900 X 3%) .......... ............... ........ ... Cash ............................................. ...............................................

201 120 101

900

Sales Returns Return s and Allo Al lowanc wances.... es....... ...... ..... Acco Ac coun unts ts Receiv Receiv able ...... ......... ...... ...... ...... .....

412 112

40

Cash .............................................. ...................................................... ........ Acco Ac coun unts ts Receivable Receivabl e ...... ......... ...... ...... ...... .....

101 112

710

J1 Cr ed i t 600 27 873 40 710

(b) Cash Dat e  Apr.  Ap r. 1 6 11 13 15 17 20 21 30

Ex p l an an at i on on Balance

Ref .

Deb i t

Cr ed i t  

J1 J1 J1 J1 J1 J1 J1 J1

40 420 784 50 30 600 873 710

 Acc  A ccou ount nt s Receiv Rec eiv able abl e Date  Apr.  Ap r. 8 18 20 27 30

5-70

Expla xplana natio tion n

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No. 101 B al an an c e 2,500 2,460 2,040 1,256 1,306 1,276 1,876 1,003 1,713 No. 112

Ref. J1 J1 J1 J1 J1

Debit 1,150   90 900

Credi reditt

600 40 710

Weygandt, Accounting Principles, 11/e, Solutions Manual

Bala Balance nce 1,150 2,050 1,450 1,410 700

(For Instructor Use Only)

PROBL PROBLEM EM 5-4B 5-4B (Con (Conti tinu nued) ed) Inventory Inventor y Date Date  Apr  A pr.. 1 4 6 8 10 11 13 14 15 17 18 21

No. 120 120 Explana Explanation tion Balance

 Ac coun co untt s Payabl Pay able e Date Date Explana Explanation tion  Apr  A pr.. 4 10 13 14 21

Ref. Ref.

Debit Debit

J1 J1 J1 J1 J1 J1 J1 J1 J1 J1 J1

840 40

Ref. Ref. J1 J1 J1 J1 J1

Credit Credit

790 40 420 16 900 50 30 540 27

Debit Debit

Credit Credit   840

40 800 900 900

Owner’s Owner’ s Capi Capital tal Date Date  Apr  A pr.. 1

Explana Explanation tion Balanc Bal ance e

Explana xplanation tion

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No. 201 Balance Balance 840 800 0 900 0

No. 301 Ref. Ref.

Debit Debit

Credit Credit

Sales Revenue Revenu e Date  Apr  A pr.. 8 18

Balance Balance 1,700 2,540 2,580 1,790 1,750 2,170 2,154 3,054 3,004 3,034 2,494 2,467

Balance Balance 4,200

No. 401 Ref. J1 J1

Debit

Credit redit 1,150 900

Weygandt, Accounting Principles, 11/e, Solutions Manual

Bala Balance nce 1,150 2,050

(For Instructor Use Only) 

5-71

PROBL PROBLEM EM 5-4 5-4B B (Cont inued) in ued) Sales Sales Retur Returns ns and All owances Dat e  Apr.  Ap r. 27

Ex p l an an at i on on

Cost of Goods Sold Dat e Ex p l an an at i on on  Apr.  Ap r. 8 18

(c)

No. 412 412 Ref . J1

Ref . J1 J1

Deb i t 40

Deb i t 790 540

B al al an an c e 40 No. 505 505 B al al an an c e 790 1,330

Cr ed i t

DIAZ TENNIS SHOP Trial Balance  Apri  Ap ri l 30, 2014 Cash .............................................. ...................................................................... ........................... ... Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... .......... .......... ....... Invent Inv entor ory y ................................................. .................................................................. ................. Owner’ Own er’s s Capital Capi tal ............................................... ....................................................... ........ Sales Revenue Reven ue .............................................. ......................................................... ........... Sales Return Retu rns s and Allo Al lowan wances ces .......... ............... .......... .......... .......... ..... Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... .......... .......... ........ ...

5-72

Cr ed i t

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Debit $1,713 700 2,467

Credit

$4,200   2,050 40 1,330 $6,250

Weygandt, Accounting Principles, 11/e, Solutions Manual

$6,250

(For Instructor Use Only)

*PROBLEM 5-5B

ROSHEK DEPARTMENT STORE Income Statement Statement (Partial) (Partial) For the th e Year Year Ended End ed December 31, 31, 2014 2014 Sales Sales revenues Sales revenu rev enue e .......................... .......................... Less: Sales Sales returns and and allow all owanc ances es ......... .............. .......... ....... Net sales sal es ................................... ................................... Cost of goods sold Invent Inv entor ory, y, Januar Jan uary y 1.......... ............... ....... Purch Pur chases ases ................................ ................................ Less: Purchase Purchase returns and allow all owanc ances es ......... ............ ... Purc hase disc di scou ount nts s ..... ..... Net purc pu rchas hases es .......... ............... .......... .......... .......  Add:  Ad d: Frei ght gh t -in ........................ ........................ Cost of goods goo ds purchased pur chased ........ ........ Cost of g oods available available for fo r sale sal e ............................... ............................... Invent Inv entor ory, y, Decemb er 31 .......... .......... Cost of good go ods s sold so ld ...... ......... ..... .. Gross Gro ss prof pr ofit it ......... .............. .......... .......... .......... .......... ........ ...

Copyright © 2013 John Wiley & Sons, Inc.

$725,000 11,000 11,000 714,000 $ 40,500 40,500 $447,000 $ 6,400 6,400 12,000 12,000

18,40 18,400 0 428,600 428,600 5,600

Weygandt, Accounting Principles, 11/e, Solutions Manual

434,200 434,200 474,700 65,000 65,000 409,7 409,700 00 $304,300 $304,300

(For Instructor Use Only) 

5-73

*PROBLEM 5-6B (a) Cost of goods sold: Beginning inventory Plus: Purchases Purchases Cost of g oods available available Less: Ending inventory Cost of goods sol d

2012

2013

2014

$ 13,000   146,000   159,000   (11,300) $147,700

$ 11,300   145,000   156,300   (14,700) $141,600

$ 14,700 129,000 143,700 (12,200) $131,500

2012 $239,000   147,700 $ 91,300

2013 $237,000   141,600 $ 95,400

2014 $235,000   131,500 $103,500

2012 $ 20,000   146,000   135,000 $ 31,000

2013 $ 31,000   145,000   161,000 $ 15,000

2014 $ 15,000   129,000 127,000 $ 17,000

(b) Sales revenue Less: CGS CGS Gross profi t (c) Beginning accoun ts payable Plus: Purchases Purchases Less: Payments Payments to s uppli ers Ending accounts payable payable (d) Gross profi t rate

1

38.2%

$91,300 ÷ $239,000

2

40.3%

$95,400 ÷ $237,000

3

44.0% $103,500 ÷ $235,000

No. Even Even thou gh sales declined in 2014 2014 from each each of the two pr ior years, the gross profit rate increased. This means that cost of goods sold declined more than sales sales did, reflecting reflecting b etter etter purc hasing power or co ntrol of co sts. Therefore, Therefore, in sp ite of declini ng sales, profitabilit y, as as measured measured by the gross profi t rate, actually impro ved.

5-74

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Weygandt, Accounting Principles, 11/e, Solutions Manual

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*PROBLEM 5-7B (a)

General Journal Dat e A c c o u n t Ti t l es an d Ex p l an at i o n  Apr  A pr.. 4 Purch Pur chases ases .............................................. ......................................................... ...........  Acc  A ccou oun n ts Payable Payab le ..................................... .....................................

Deb i t 740

740

6 Frei ght gh t -in .............................................. ........................................................... ............. Cash ................................................ ........................................................... ...........

60

8 Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... .......... ......... .... Sales Revenue ..........................................

900

10 Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ......... .... Purchase Retur Returns ns and All owances .... ...... .... ....

40

11 Purch Pur chases ases ............................................. ......................................................... ............ Cash ................................................ ........................................................... ...........

300

13 Acco Ac coun unts ts Payabl Payable e ($740 ($740 – $40) $40) ...... ......... ...... ...... ...... ...... ..... .. Purchase Purc hase Disc ount ou nts s ($700 ($700 X 3%) ...... ......... ...... ... Cash ................................................ ........................................................... ...........

700

14 Purch Pur chases ases .............................................. ......................................................... ...........  Acc  A ccou oun n ts Payable Payab le ..................................... .....................................

700

15 Cash................................................................... Purchase Retur Returns ns and All owances .... ...... .... ....

50

17 Frei ght gh t -In .............................................. ........................................................... ............. Cash ................................................ ........................................................... ...........

30

18 Acco Ac coun unts ts Receiv able abl e .......... ............... .......... ......... ......... .......... .......... ..... Sales Revenue ..........................................

1,000

20 Cash...................................................................  Ac coun co untt s Receiv Rec eivabl abl e................................

500

21 Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... .......... ......... .... Purchase Purc hase Disc ount ou nts s ($700 ($700 X 2%) ...... ......... ...... ... Cash ................................................ ........................................................... ...........

700

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Weygandt, Accounting Principles, 11/e, Solutions Manual

Cr ed i t

60 900 40 300 21 679 700 50 30 1,000 500 14 686

(For Instructor Use Only) 

5-75

*PROBLEM *PROBLEM 5-7B 5-7B (Conti nued) nu ed) Dat e A c c o u n t Ti t l es an d Ex p l an at i o n  Apr  Ap r . 27 Sales Retur Retu r ns and Al l owanc ow ances es ................... ................... Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... ........ ...

Deb i t 25

30 Cash .............................................. ............................................................... ................. Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... ........ ...

550

Cr ed i t 25 550

(b) Cash Cash 4/1 Bal. Bal . 2,500 2,500 4/6 4/15 50 4/11 4/20 500 4/13 4/30 550 4/17 4/21 4/30 4/30 Bal. 1,845 1,845

60 300 679 30 686

4/10 4/13 4/21

Acc ounts oun ts Payable Payable 40 4/4 700 4/14 700 4/30 Bal. Bal .

 Ac coun co untt s Receiv Rec eiv able abl e 4/8 900 4/20 500 4/18 1,000 4/27 25 4/30 550 4/30 B al . 825 Inventory 4/1 Bal. 1,700 1,700 4/30 B al . 1,700   Sales Sales Retur Retur ns and All owances 4/27 25 4/30 4/30 Bal. 25   Pu r c h as es 4/4 740 4/11 300 4/14 700 4/30 Bal. Bal . 1,740

0

Owner’ s Capital 4/1 Bal. Bal . 4/30 Bal. Bal .

4,200 4,200 4,200

Sales Revenue 4/8 4/18 4/30 Bal. Bal .

900 1,000 1,900 1,900

Purchase Discounts Discoun ts 4/13 4/21 4/ 4/30 4/30 Bal.

4//6 4 4/17 4/30 B al .

740 700

21 14 35

Freigh t-In 60 30 90

Purchase Returns Returns and Allo wances 4/10 40 4/15 50 4/30 Bal. Bal . 90 5-76

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Weygandt, Accounting Principles, 11/e, Solutions Manual

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*PROBLEM *PROBLEM 5-7B 5-7B (Cont inued) in ued) (c)

EVERETT TENNIS SHOP Trial Balance  Apr  A prilil 30, 2014 Cash ............................................... ........................................................................ ......................... Accou nts Receivable Receivable............................................. ............................................. Invent Inv entor ory y ............................................. ................................................................ ................... Owner’ Own er’s s Capital Capi tal........................ ................................................ .............................. ...... Sales Revenue Reven ue ................................................ ....................................................... ....... Sales Retur ns and Allo Al lowan wances ces .......... ............... .......... .......... ......... .... Purch Pur chases ases ................................................. .............................................................. ............. Purchase Purc hase Return s and Allo Al lowanc wances es ...... ......... ...... ...... ...... ...... ..... Purch Pur chase ase Disco Dis coun unts ts .......... ............... .......... .......... .......... .......... .......... .......... ....... Frei ght gh t -In ............................................... ................................................................ .................

Deb i t $1,845   825 1,700

Cr ed i t

$4,200 1,900 25 1,740 90 35 90 $6,225

$6,225

EVERETT TENNIS SHOP Income Statement Statement (Partial) (Partial) For th e Month Ended Apr il 30, 30, 2014 2014 Sales Sales revenues Sales revenu rev enue e .............................. .............................. Less: Sales Sales returns and and allow all owanc ances es .......... ............... .......... ......... .... Net sales sal es ....................................... ....................................... Cost of goods sold Invent Inv entor ory, y, Apri Ap rill 1 .......... ............... .......... .......... ..... Purch Pur chases ases .................................... .................................... Less: Purchase returns and allow all owanc ances es .......... ............... ....... Purc hase disc di scou ount nts s ...... ......... ... Net purc pu rchas hases es .......... ............... .......... .......... .......... .....  Add:  Ad d: Frei ght gh t -in ............................ ............................ Cost of good go ods s purc pu rchased hased ...... ......... ..... .. Cost of g oods available available for fo r sal e ................................... ................................... Invent Inv entor ory, y, Apri Ap rill 30 .......... ............... .......... ........ ... Cost of good go ods s sold so ld ...... ......... ...... ...... ... Gross Gro ss prof pr ofit it .......... ............... .......... ......... ......... .......... .......... ....... ..

Copyright © 2013 John Wiley & Sons, Inc.

$1,900 25 1,875 $1,700 $1,700 $1,740 $90 35

125 1,615 1,615 90

Weygandt, Accounting Principles, 11/e, Solutions Manual

1,705 1,705 3,405 2,296 2,296 1,109 1,109 $ 766 (For Instructor Use Only) 

5-77

COMPREHENSIVE PROBLEM SOLUTION

(a)

Dec. 6

8 10

13 15 18

20 23

27

5-78

Salari es and Wages Payable Payabl e .......... ............... .......... ....... Salari es and Wages Expens Exp ense e .......... ............... ......... ...... Cash ................................................ ..................................................... .....

1,000 600

Cash ............................................... ............................................................ ............. Acco Ac coun unts ts Receiv able abl e .......... ............... .......... ......... ......

1,900

Cash ............................................... ............................................................ ............. Sales Revenue Reven ue .................................... ....................................

6,300

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ....... Invent Inv entor ory y ............................................ ..............................................

4,100

Inv entor ent ory y .............................................. ..................................................... ....... Acco Ac coun unts ts Payable Payabl e.......... ............... .......... .......... .......... .......

9,000

Suppl Sup pl i es ............................................... ...................................................... ....... Cash ................................................ ..................................................... .....

2,000

Acco Ac coun unts ts Receiv able abl e .......... ............... .......... .......... .......... ........ ... Sales Revenue Reven ue .................................... ....................................

12,000

Cost Cos t of Goods Goo ds Sold Sol d .......... ............... .......... .......... .......... .......... ....... Invent Inv entor ory y ............................................ ..............................................

8,000

Salari es and Wages Expens Exp ense......... e.............. .......... ....... Cash .............................................. ..................................................... .......

1,800

Acco Ac coun unts ts Payable Payabl e .......... ............... .......... .......... .......... .......... ........ ... Cash ................................................ ..................................................... ..... Invent Inv entor ory y ($9,000 ($9,000 X .02).......... ............... .......... ....... ..

9,000

Cash ............................................... ............................................................ ............. Sales Disco Dis coun unts ts ($12,000 ($12,000 X .03) ......... .............. ....... .. Acco Ac coun unts ts Receivabl Receiv able e .......... ............... .......... .......... .....

11,640 360

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1,600 1,900 6,300 4,100 9,000 2,000 12,000 8,000 1,800 8,820 180

Weygandt, Accounting Principles, 11/e, Solutions Manual

12,000

(For Instructor Use Only)

COMPREHE COMPREHENSIVE NSIVE PROBLEM PROBLEM SOLUTION (Con (Conti tinu nued) ed) (c)

Dec. 31

Salaries and Wages Wages Expens e ...... ......... ...... ...... ...... ..... .. Salari es and Wages Payabl e .......... .............. ....

800

Depreciat Deprec iatio ion n Expens Exp ense e .......... ............... .......... .......... .......... ....... .. Accum ulated Depreciation— Depreciation— Equipment......................................... Equipment .........................................

200

Suppl Sup plies ies Expen Ex pense se .......... ............... .......... .......... .......... .......... ......... ....  Suppl Sup pl i es ($3,200 – $1,500)..................

1,700

(b) & (c) Cash 12/1 B al. 7,200 12/6 12/8 1,900 12/15 12/10 6,300 12/20 12/27 11,640 12/23 12/31 B al. 12,820

Supplies 12/1 B al. 1,200 12/31 12/15 2,000 12/31 Bal . 1,500

Copyright © 2013 John Wiley & Sons, Inc.

200 1,700

General General Ledger Ledg er 1,600 2,000 1,800 8,820

 Ac coun co unts ts Receivab Recei vabll e 12/1 B al. 4,600 12/8 1,900 12/18 12,000 12/27 12,000 12/31 Bal . 2,700 Inventory 12/1 B al. 12,000 12/10 12/13 9,000 12/18 12/23 12/31 Bal . 8,720

800

Equipment 12/1 12/1 Bal. 22,00 2,000 0 12/31 12/31 Bal. Bal . 22,000 22,000  Acc  A ccum um ul ated Depr.—Equ Depr .—Equii pment pm ent 12/1 B al . 2,200 12/31 200  12/  12/3 31 Bal. 2,4 2,400

12/23 4,100 8,000 180

1,700

 Ac coun co untt s Payabl Pay able e 9,000 12 12/1 B al . 4,500 12/13 9,000  12/  12/3 31 Bal. 4,5 4,500

Salaries and Wages Payable 12/6 1,000 12 12/1 B al . 1,000 12/31 800  12  12/31 B al . 800

Weygandt, Accounting Principles, 11/e, Solutions Manual

(For Instructor Use Only) 

5-79

COMPREHENSIVE PROBLEM SOLUTION (Continued) Owner’s Capital 12/1 Bal. Bal . 39,300 12/31 B al. 39,300 Sales Revenue 12/10 6,300 12/18 12,000 12/31 B al. 18,300 Sales Sales Discount s 12/27 360 12/31 Bal. Bal . 360

Depreciation Expense 12/31 200 12/31 B al . 200 Salaries Salaries and Wages Expense 12/6 600 12/20 1,800 12/31 800 12/31 /31 Bal. 3,20 ,200 Supplies Expense 12/31 1,700 12/31 /31 Bal. 1,70 ,700

Cost of Goods Sold 12/10 4,100 12/18 8,000 12/31 Bal. Bal . 12,100

5-80

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COMPREHE COMPREHENSIVE NSIVE PROBLEM PROBLEM SOLUTION (Con (Conti tinu nued) ed) (d)

PROSEN DISTRIBUTING COMPANY  Adj  A dj usted us ted Tri al B alance alan ce December Decemb er 31, 2014 2014 Cash ...... ......... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... .....  Acc  A cc ount ou nts s Rec eivabl eiv able e ..................................... ..................................... Inventory Inventory .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Supplies .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .. Equipment .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ....  Acc  A ccum um ul ated Depreci Depr eciati ation on—Equ —Equii pment pm ent ......  Acc  A cc ount ou nts s Payabl Pay abl e .......................................... .......................................... Sal ar i es an d Wag es Pay ab l e .. ......................... Owne wner’s r’s Capita pitall .............................................. Sales les Revenu venue e ................................................ Sales les Discount iscounts s ... ............................................. Cost of Goods Sold.... Sold...... .... ........ ...... .... .... .... .... ........ ...... .... .... .... .... ..... Deprecia preciation tion Expense xpense..................................... Salarie laries s and and Wage Wages s Expe Expense. nse........................ Supplies Expense Expense .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ..

(e)

DR. $12,82 $12,820 0 2,700 8,72 8,720 0 1,50 1,500 0 22,0 22,000 00

CR.

$ 2,400 4,500 800 39,300 18,300 360 12,1 12,100 00 200 3,200 1,70 1,700 0 $65,300

$65,300

PROSEN DISTRIBUTING COMPANY Income Incom e Statement Statement For the Month Ending December 31, 2014 Sales les reve revenu nue e ................................................. L es s : Sal es d i s c o u n t s .................................. Net sale sales s ......................................................... Co s t o f g o o d s s ol ol d ........................................ Gross ross prof profit it .................................................... Op er at i n g ex p en s es Salarie laries s and and wage wages s expe expense. nse.................. Supplies Supplies expense expense ... ....... ...... .... .... .... .... .... .... .... .... .... .... ........ ...... Deprecia preciation tion expense xpense ............................ Net inco income me......................................................

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COMPREHENSIVE PROBLEM SOLUTION (Continued) PROSEN DISTRIBUTING COMPANY Owner’s Owner’s Equity Stateme Statement nt For t he Month Mont h Ended End ed December 31, 2014 2014 Owner’s wner’s Capita Capital, l, De Dec. 1 ..................................................  Add  Ad d : Net i ncom nc om e .............................................. ........................................................... ............. Owner’s wner’s Capita Capital, l, De Dec. 31 31 ................................................

$39,300 740 $40,040

PROSEN DISTRIBUTING COMPANY Balance Sheet December Decemb er 31, 2014  Ass  A ssets ets Current assets Cash Cash .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... Accounts Accounts rece receiva ivable ble ................................. Inventory ..... ...... ........ ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... ........ ...... Supplies .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... To t al c u r r en t as s et s ............................

$12, $12,82 820 0 2,700 8,720 ,720 1,50 1,500 0

Property, plant, and equipment Equipment .... ...... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... L es s : A c c u m u l at ed d ep r ec i at i o n .. ............ To t al as s et s .......................................................

22,0 22,000 00 2,400

$25,740

19,600 $45,340

Liabilit ies and and Owner’s Equity Current Current liabili ties  Ac coun co untt s p ayabl ayab l e ..................................... ..................................... Salarie laries s and wage wages s paya payable ble .................... To t al c u r r en t l i ab i l i t i es .. ........................

$4,500 800

Owner’s Owner’s equit y Ow n er ’ s c ap i t al ......................................... To t al l i ab i l i t i es an d o w n er ’ s eq u i t y .. .................

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BYP 5-1

FINANCIAL REPORTING REPORTING PROBLEM

2010 (a)

(1) (1)

(2) (2)

(b)

(c)

Percentage Percentage chang e in sales: ($65,225 – $42,905) ÷ $42,905 ($108,249 – $65,225) ÷ $65,225

52.0% 52.0% incr ease

Percentage Percentage chang e in net inc ome: ($14,013 – $8,235) ÷ $8,235 ($25,922 – $14,013) ÷ $14,013

70.2% 70.2% incr ease

2011

66.0% 66.0% incr ease

85.0% 85.0% incr ease

Gross profit rate: rate: 2009 ($42,905 – $25,683) ÷ $42,905 2010 ($65,225 – $39,541) ÷ $65,225 2011 ($108,249 – $64,431) ÷ $108,249

40.1% 39.4% 40.5%

Percentage Percentage of net inc ome to sales: 2009 ($8,235 ÷ $42,905) 2010 ($14,013 ÷ $65,225) 2011 ($25,922 ÷ $108,249)

19.2% 21.5% 23.9%

Comment The percentage of net income to sales increased 12% from 2009 to 2010 (19.2% to 21.5%) and increased 11.2% from 2010 to 2011 (21.5% to 23.9%). The gross profi p rofi t rate has remained remained relatively steady during this t his time. t ime.

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BYP 5-2

(a) (1)

COMPARATIVE ANALYSIS ANA LYSIS PROBLEM

2011 Gr o s s p r o f i t

Pep s i Co

Co c a-Co l a

$34,911

$28,326

(2)

2011 Gr o s s p r o f i t r at e

52.5%

60.9%

(3)

2011 Op er at i n g i n c o m e

$9,633

$10,154

(4) (4)

Percent Percent change in operating operatin g inco in come, me, 2010 2010 to 2011 2011

15.6% increase

20.2% increase

$66,504 – $31,593

($46 ($46,5 ,542 42 – $18, $18,21 216) 6) $34, $34,91 911 1 ÷ $66, $66,50 504 4

$28,326 ÷ $46,542

($9,633 ($9,633 – $8,332) $8,332) ÷ $8,332 $8,332

($10,154 – $8,449) ÷ $8,449 (b) PepsiCo PepsiCo has has a higher gross pro fit but a lower gross pr ofit rate than Coca-Cola. Coca-Cola. This can c an be explained by PepsiCo’s higher high er sales. Coca-Cola had a larger operating income because its selling, general, and administ rative expenses expenses were much smaller than PepsiCo’s.

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BYP 5-3

COMPARA COMPARATIVE TIVE ANALYSIS ANA LYSIS PROBLEM

 Am azon

Wal-Mart Wal-Mar t

2011 Gr o s s p r o f i t

$4,712

$108,727

(2)

2011 Gr o s s p r o f i t r at e

11.2%

24.5%

(3)

2011 Op er at i n g i n c o m e

$862

$26,558

(4) (4)

Percent Percent change in operating operatin g inco in come, me, 2010 2010 to 2011 2011

38.7%5 decrease

4.0%6 increase

(a) (1)

$42,000 – $37,288 4

($44 ($443, 3,85 854 4 – $335 $335,1 ,127 27))

$108,727 ÷ $443,854

6

$4,712 $4,712 ÷ $42,00 $42,000 0

5

($862 ($862 – $1,40 $1,406) 6) ÷ $1,4 $1,406 06

($26,558 – $25,542) ÷ $25,542

(b) Wal-M Wal-Mart art has has a much hi gher gross profi t and gross profit r ate than  Amazon.  Am azon. This Thi s can c an be explain expl ained ed by Wal-Mart’s Wal-Mart ’s high hi gher er marku mar kup. p. Wal-Mart’s operating income increased 4.0% while Amazon’s decreased by almost 39%. Amazon’s operating expenses increased 44% 44% during 2011 2011 causing i ts o perating perating incom e to decline signi ficantly.

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BYP 5-4

REAL-WORLD FOCUS FOCUS

The answers to this assignment will be dependent upon the articles selected selected from the Internet Internet by the student.

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B YP 5-5

(a) (1)

DECISION MAK ING ACROSS THE ORGANIZATION ORGANIZA TION

FAMILY FA MILY DEPARTMENT STORE Income Incom e Statement Statement For the th e Year Year Ended End ed December 31, 31, 2014 2014 Net sales sal es [$700,000 + ($700,000 X 6%)] ...... Cost Cos t of good go ods s sold so ld ($742,00 ($742,000 0 X 76%)* 76%)* ....... ....... Gross Gro ss prof pr ofit it ($742,00 ($742,000 0 X 24%) 24%).......... .............. ......... ....... .. Operating expenses Sellin Sell ing g expens exp enses es ......... .............. .......... .......... .......... .......... .....  Ad mi ni str st r ativ ati v e expens exp enses es ..................... Total operatin op eratin g expenses expens es ...... ......... ...... ... Net i ncom nc om e ........................................... .................................................... .........

$742,000 563,920 563,920 178,080 178,080 $100,000 $100,000 20,000 120,00 120,000 0 $ 58,080

**Altern *Al ternativ ativ ely: Net sales, $742 $742,00 ,000 0 – gros gr oss s profi pro fit, t, $178 $178,08 ,080. 0. (2)

FAMILY FA MILY DEPARTMENT STORE Income Incom e Statement Statement For the th e Year Year Ended End ed December 31, 31, 2014 2014 Net sales sal es ............................................... ....................................................... ........ Cost of goods sol d ....................................... Gros Gro s s prof pr of it .......................................... ................................................... ......... Operating expenses Sellin Sell ing g expens exp enses es ......... .............. .......... .......... .......... .......... .....  Ad mi ni str st r ativ ati v e expens exp enses es ..................... Net i ncom nc om e ........................................... .................................................... .........

$700,000 553,000 147,000 $72,000* $72,000* 20,000* 20,000 * 

92,000 $ 55,000

*$100,000 – $30,000 + ($700,000 X 2%) – ($30,000 ($30,000 X 40%) = $72,000. (b) Dana’s Dana’s proposed prop osed changes will inc rease net incom e by $31, $31,08 080. 0. Eric’ s proposed changes will reduce operating expenses by $28,000 and result in a corr esponding i ncrease ncrease in net income. Thus, Thus, if the choi ce is between Dana’s plan and Eric’s plan, Dana’s plan should be adopted. While Eric’s plan will increase net income, it may also have an adverse effect on sales personnel. Under Eric’s plan, sales personnel will be taking taki ng a cut of $16,00 $16,000 0 in comp co mpensati ensati on [$60,000 [$60,000 – ($30, ($30,000 000 + $14,0 $14,000) 00)]. ].

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BYP 5-5 (Continued) (c)

FAMILY DEPARTMENT DEPARTMENT STORE STORE Income Incom e Statement Statement For the th e Year Year Ended En ded December Decemb er 31, 2014 2014 Net s ales .............................................. ............................................................. ............... Cost Cos t of good go ods s sold so ld .......... ............... .......... .......... .......... .......... .......... .......... ..... Gross Gro ss prof pr of i t ............................................. ......................................................... ............ Operating expenses Sellin Sell ing g expens exp enses es ......... .............. .......... .......... .......... .......... .......... .......  Adm  A dm ini in i st rat iv e expens exp enses es ........................... ........................... Total Tot al operati op erati ng expens exp enses es .......... ............... ......... .... Net i ncom nc om e .......................................... .......................................................... ................

$742,000 563,920 563,920 178,080 $72,840* $72,840* 20,000* 20,000 * 92,840 92,840 $ 85,240

*$72,000 + [2% X ($742,000 – $700,000)] $700,000)] = $72,840. If both plans are implemented, net income will be $58,240 ($85,240 – $27, $27,00 000) 0) higher t han the t he 2013 2013 resul results. ts. This Thi s is i s an increase inc rease of over o ver 200% 200%. Given Given the th e size of the t he increase, increase, Eric’ Eric’ s pl an to compensate co mpensate sales sales personnel might be modified so that they would not have to take a pay cut. For example, example, if sales sales commis com mission sions s were 3% 3%, the compensation cut would woul d be redu r educed ced to $8,580 $8,580 [$16,000 [$16,000 (from (fro m (b)) – $742,00 $742,000 0 X (3% – 2%)]. 2%)].

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B YP 5-6

COMMUNICATION ACTIVITY

(a), (b) President Surfin g USA Co. Co. Dear Sir:  As you yo u k now, no w, the th e fi nanci nan ci al s tatemen tat ements ts for fo r Sur fi ng USA Co. are pr epared epar ed i n accordance with generally accepted accounting principles. One of these principles is the revenue recognition principle, which provides that revenues should sho uld be recognize recogni zed d when th ey are are earned. earned. Typically, sales revenues are earned when the goods are transferred to the buyer from the seller. At this point, the sales transaction is completed and the sales sales pr ice is establis establis hed. Thus, Thus, in the typic al situ ation, revenue revenue on t he surfb oard ordered by Connor is earned earned at event No. 8, 8, when Connor pi cks up the surf board. The circumstances pertaining to this sale may seem to you to be atypical because Connor has ordered a specific kind of surfboard. From an accounting standpoint, this would be true only if you could not reasonably expect expect to sell this surfbo ard to another custom er. In such case, it wo uld b e proper under generally accepted accounting principles to recognize sales revenue revenue when you h ave compl eted eted the surf board for Connor. Whether Connor makes a down payment with the purchase order is irrelevant in recognizing sales revenue because at this time, you have not done anything to earn the revenue. A down payment may be an indication of Connor’s “good faith.” However, its effect on your financial statements is limited entirely entirely to recogni r ecogni zing the t he down payment as un earned earned revenue. If you have further questions about the accounting for this sale, please let me know. Sincerely,

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BYP 5-7

ETHICS CASE

(a) (a) Jacquie Boynton, as as a new employ employ ee, ee, is placed placed in a position o f responsi bili ty and is pressured pressured by her supervis supervis or to cont inue an an unethical practice previously performed by him. The unethical practice is taking undeserved cash discounts. Her dilemma is either follow her boss’s unethical instructions or offend her boss and maybe lose the job she  jus  j ustt assum ass umed. ed. (b) The stakehol ders (affect (affected ed parties) parti es) are: Jacquie Boyn ton, the assist ant treasurer. treasurer. Phelan Phelan Carter, Carter, t he tr easur easurer. er. Key West, West, the th e company. company . Creditors of Key West Stores (suppliers). Mail Mail room r oom emp loyee loy ees s (those (thos e assi assi gned the th e blame). blame). • • • • •

(c) Jacquie’s Jacqu ie’s alternatives: alternativ es: 1. Tell Tell the treasurer treasurer (her (her boss) that she will wil l attempt attempt to take every every allowable cash discount by preparing and mailing checks within the discount period—the ethical thing to do. This will offend her boss and may jeopardize her her c ontin ued employment. 2. Join Joi n the team team and and continue conti nue the unethical unethic al practice practic e of taking undeserved undeserved cash discounts. 3. Go over her her boss’ s head head and and take the chance chance of receiving receiving jus t and reasonable treatment from an officer superior to Phelan. The company may not condone this practice. Jacquie definitely has a choice, but probably not without consequence. To continue the practice is definitely unethical. If Jacquie submits to this request, she may be asked to perform other unethical tasks. If Jacquie stands her ground and refuses to participate in this unethical practice, she probably won’t be asked to do other unethical things—if she isn’t fired. Maybe nobody has ever challenged Phelan’s unethical behavior and his reaction may be one of respect rather than anger and retribution. Being ethically compromised is no way to start a new job.

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BYP 5-8

ALL AL L ABOUT AB OUT YOU

In order for revenue to be recognized the performance obligation must be satisfied. In this case Impact has an obligation to provide goods with a value equal to the gift card. That obligation is not fulfilled until one of two things happens: Either the customer redeems the card for goods, or the card expires. Until either either of tho se events oc curs cur s Impact cannot record revenue.

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BYP 5-9 (a) (a) (1) (1)

FASB CODIFICATION CODIFICATION ACTIVITY Inventory is the aggregate of those items of tangib tangib le personal property that have any any of the following characteristics: characteristics: a. Held Held for sale in the ordi nary course of busi ness b. In process of production for such sale sale c. To be currently consumed in the productio n of goods or services services to be available for sale. The term inventory embraces embraces goods go ods awaiting sale (the (the merchand ise is e of a trading concern and the finished goods of a manufacturer), goods in the course of production (work in process), and goods to be consumed directly or indirectly in production (raw materials and supplies). This definition of inventories excludes long-term assets subject to depreciation accounting, or goods which, when put into use, will b e so classi fied. The The fact that a depreciable asset is retired from regular use and held for sale does not indicate that the item should be classified as part of the inventory. Raw materials and supplies purchased for production may be used or consumed for the construction of long-term assets or other purposes not related to pro duction, but the fact fact that inventory items representing representing a small portion of the total may not be absorbed ultimately ultimately in the production process does not require separate classification. By trade practice, operating materials and supplies of certain types of entities such as oil p rodu cers are usually t reated reated as as invento ry.

(2) (2)

5-92

A customer is a reseller or a con sumer, either an ind ivid ual or a business that purchases a vendor’s products or services for end use rather than for resale. This definition is consistent with paragraph 280-10-50-42, which states that a group of entities known to a reporting entity to be under common control shall be considered considered as a singl e custom er, and and t he federal federal go vernment, a state governm ent, a local government (for example, a county or municipality), or a foreign government each shall be considered as a single customer. Customer includes any purchaser of the vendor’s products at any point along the distribution chain, regardless of whether the purchaser acquires the vendor’s products directly or indirectly (for example, example, from a distr ibut or) from the vendor. For For example, a vendor vendor may sell sell its prod ucts to a distributor who in turn resells the produc ts to a retailer. The The retailer retailer in that example is a cus tomer o f th e vendor.

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BYP 5-9 5-9 (Contin ued) (b) 330-1 330-10-3 0-355-15 15 Only in excepti onal on al cases cases may inv entor ies prop erly be stated above cost. For example, example, precious metals having a fix ed monetary value with no substantial cost of marketing may be stated at such monetary value; any other exceptions must be justifiable by inability to determine appropriate approximate costs, immediate marketability at quot ed market market pric e, and the characteristi characteristi c of uni t interch angeabili angeabili ty.

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IFRS EXERCISES

IFRS5-1 Expenses may be classified by “nature” or by “function”. The “nature-ofexpense” expense” classifi cation or ganizes ganizes expenses expenses by type of expense, expense, such as salaries, depreciation, rent, rent, or supplies. suppli es. The “ functio func tion-of-e n-of-expense” xpense” classific classi ficaation presents presents expenses expenses by type of business busi ness activit activity. y. Example Examples s would woul d incl ude cost of goo ds so ld, selling, admin admin istrative, operating, operating, and and non -operating. -operating. IFRS5-2 By By By By By By By

function nature nature funct ion nature nature natur e funct ion

Cost of goods sold Depreciati Depreciati on expense Salaries Salaries and wages expense Selli Selling ng expenses expenses Utiliti es expense expense Deli Delivery very expense Genera Generall and administr ative expenses expenses

IFRS5-3 MATILDA COMPANY Comprehensive Income Statement For t he Year Year Ended End ed 2014 2014 (in thousands of euros) Net income ............................................................................... Unrealized Unrealized gain related to t o revaluation revaluatio n of buildi bui ldings ngs .... ...... .... .... .... .... .. Unrealized Unreali zed loss lo ss related to invest in vestment ment securi secu riti ties es ...... ......... ...... ...... ...... ... Items not no t recogn reco gnized ized on the th e inco in come me statement st atement ...... ......... ...... ...... ...... ..... .. Total comprehensive income ........................................

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INTERNATIONAL INTERNATIONAL FINANCIAL REPORTING REPORTING PROBL PROBLEM EM

IFRS5-4 (a) (a) Zetar Zetar uses a multip mul tiple le step format. The The income inc ome statement statement isol ates gross gro ss profit, operating profit, and profit from continuing operations before taxation taxation rather rather tha th an simply si mply s howing total revenues revenues less total expenses to arrive arriv e at net income. inco me. (b) Zetar Zetar uses Finance Costs rather rath er than Interest Expense Expense on its i ncome nco me statement. (c) Zetar’s Zetar’s income stateme statement nt shows Adju sted result result s, Adjus ting items, and and Total amounts for revenue and expense items. Note 13 indicates that Zetar considers the adjusted results and adjusted EPS to provide additional useful information on its performance. It goes on to list a number of unusual unu sual items that it has adjusted for on its i ncome statement. statement. One-off One-off it ems are listed as part of the adjustments group . OneOne-off off items are non-recurring material material cos ts o r revenues revenues of an unusual nature that have been been exclu exclu ded from the Adjust ed result result s on the incom e statement statement in order to provi de a more consistent measure measure of underlying perfor perf ormanc mance. e.

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