Chapter 4: 4-12DQ (page 205)
Refer to Google’s income statement in Appendix A. What title does it use for the cost of goods sold?
Google uses the title “cost of revenue” to report the cost of goods sold.
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Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 3∕10, n∕60 and an invoice price of \(24,000. The merchandise had cost Mesa \)16,000. Assume that both buyer and seller use a perpetual inventory system and the gross method.
1. Prepare entries that the buyer records for the (a) purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.
2. Prepare entries that the seller records for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.
Nix’It Company’s ledger on July 31, its fiscal year-end, includes the following selected accounts that have normal balances (Nix’It uses the perpetual inventory system).
Merchandise inventory | \(37,800 | Sales return and allowances | \)6,500 |
Retained earnings | 115,300 | Cost of goods sold | 105,000 |
Dividends | 7,000 | Depreciation expenses | 10,300 |
Sales | 160,200 | Salaries expenses | 32,500 |
Sales discount | 4,700 | Miscellaneous expenses | 5,000 |
A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $35,900. Prepare the entry to record any inventory shrinkage.
Chico Company allows its customers to return merchandise within 30 days of purchase.
a. Prepare the December 31, 2017, year-end adjusting journal entry for estimated future sales returns and allowances (revenue side).
b. Prepare the December 31, 2017, year-end adjusting journal entry for estimated future inventory returns and allowances (cost side).
c. Prepare January 3, 2018, journal entry(ies) to record the merchandise returned.
Refer to Exercise 4-3 and prepare journal entries to record each of the merchandising transactions assuming that the buyer uses the periodic inventory system and the gross method.
Prepare journal entries to record each of the following sales transactions of a merchandising company. The company uses a perpetual inventory system and the gross method.
Apr. 1 Sold merchandise for \(3,000, with credit terms n∕30; invoice dated April1. The cost of the merchandise is \)1,800.
4 The customer in the April 1 sale returned \(300 of merchandise for full credit. The merchandise, which had cost \)180, is returned to inventory.
8 Sold merchandise for \(1,000, with credit terms of 1∕10, n∕30; invoice dated April 8. Cost of the merchandise is \)700.
11 Received payment for the amount due from the April 1 sale less the return on April 4.
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