Chapter 4: 4-13DQ (page 205)
Refer to the income statement for Samsung in Appendix A. What does Samsung title its cost of goods sold account?
Samsung uses the title “cost of sales” for the cost of goods sold.
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Refer to Exercise 4-7 and prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system and the gross method are used by both the buyer and the seller.
Refer to QS 4-5 and prepare journal entries to record each of the merchandising transactions assuming that the company records purchases using the net method and a perpetual inventory system.
Distinguish between cash discounts and trade discounts for purchases. Is the amount of a trade discount on purchased merchandise recorded in the accounts?
Refer to the information in Exercise 4-12 and indicate whether the failure to include in-transit inventory as part of the physical count results in an overstatement, understatement, or no effect on the following separate ratios: (a) gross margin ratio and (b) profit margin ratio.
Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Aron.)
Aug. 1 Purchased merchandise from Aron Company for \(7,500 under credit terms of 1∕10, n∕30, FOB destination, invoice dated August 1.
5 Sold merchandise to Baird Corp. for \)5,200 under credit terms of 2∕10, n∕60, FOB destination, invoice dated August 5. The merchandise had cost \(4,000.
8 Purchased merchandise from Waters Corporation for \)5,400 under credit terms of 1∕10, n∕45, FOB shipping point, invoice dated August 8.
9 Paid \(125 cash for shipping charges related to the August 5 sale to Baird Corp.
10 Baird returned merchandise from the August 5 sale that had cost Lowe’s \)400 and was sold for \(600. The merchandise was restored to inventory.
12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of \)400 off the \(5,400 of goods purchased.
14 At Aron’s request, Lowe’s paid \)200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron.
15 Received balance due from Baird Corp. for the August 5 sale less the return on August 10.
18 Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.
19 Sold merchandise to Tux Co. for \(4,800 under credit terms of n∕10, FOB shipping point, invoice dated August 19. The merchandise had cost \)2,400.
22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a \(500 credit memorandum toward the \)4,800 invoice to resolve the issue.
29 Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22.
30 Paid Aron Company the amount due from the August 1 purchase.
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