Chapter 4: Q4-22QS (page 209)
Refer to QS 4-8 and prepare journal entries to record each of the merchandising transactions assuming that the company records sales using the net method and a perpetual inventory system.
Answer
Both sides of the journal totals$9,670.
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Prepare journal entries to record each of the following transactions. The company records purchases using the gross method and a perpetual inventory system.
Sep. 15 Purchased merchandise with an invoice price of $35,000 and credit terms of 2∕5, n∕15.
29 Paid supplier the amount owed on the September 15 purchase.
L’Oréal reports the following income statement accounts for the year ended December 31, 2014 (euros in millions). Prepare the income statement for this company for the year ended December 31, 2014, following usual IFRS practices.
Net profit | €4,908.6 | Income tax expenses | €1,111 |
Finance Cost | 31.4 | Profit before tax expenses | 6,019.6 |
Net sales | 22,532 | Research and development expenses | 760.6 |
Gross profit | 16,031.3 | Selling, general and administrative expenses | 4,821.1 |
Other income | 2,118 | Advertising and promotion expenses | 6,558.9 |
Cost of sales | 6,500.7 | Finance income | 42.3 |
Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method.
Apr. 2 Purchased \(4,600 of merchandise from Lyon Company with credit terms of 2∕15, n∕60, invoice dated April 2, and FOB shipping point.
3 Paid \)300 cash for shipping charges on the April 2 purchase.
4 Returned to Lyon Company unacceptable merchandise that had an invoice price of \(600.
17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.
18 Purchased \)8,500 of merchandise from Frist Corp. with credit terms of 1∕10, n∕30, invoice dated April 18, and FOB destination.
21 After negotiations, received from Frist a \(500 allowance toward the \)8,500 owed on the April 18 purchase.
28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.
The following supplementary records summarize Tesla Company’s merchandising activities for year 2017 (it uses a perpetual inventory system). Set up T-accounts for Merchandise Inventory and Cost of Goods Sold. Then record the summarized activities in those T-accounts and compute account balances.
Cost of merchandise sold to customer in sales transaction | $196,000 |
Merchandise inventory, December 31, 2016 | 25,000 |
Invoice cost of merchandise purchase, gross amount | 192,500 |
Shrinkage determined on December 31, 2017 | 800 |
Cost of transportation in | 2,900 |
Cost of merchandise returned by customer and restored to inventory | 2,100 |
Purchase discount received | 1,700 |
Purchase return and allowances | 4,000 |
Lopez Company reports unadjusted first-year merchandise sales of \(100,000 and cost of merchandise sales of \)30,000.
a. Compute gross profit (using the unadjusted numbers above).
b. The company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.
1. Prepare the year-end adjusting entry to record the sales expected to be refunded.
2. Prepare the year-end adjusting entry to record the cost side of sales returns and allowances.
3. Recompute gross profit (using the adjusted numbers from parts 1 and 2).
c. Is Sales Refund Payable an asset, liability, or equity account?
d. Is Inventory Returns Estimated an asset, liability, or equity account?
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