Chapter 4: Q4-5E (page 210)
Refer to Exercise 4-4 and prepare journal entries for Macy Co. to record each of the May transactions. Macy is a retailer that uses the gross method and a perpetual inventory system, and purchases these units for resale.
Answer
Both debit and credit sides of the journal amount to$42,000 each.
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The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.
| NELSON COMPANY | ||
| Unadjusted Trial Balance | ||
| January 31, 2017 | ||
Debit | Credit | |
Cash | \(1,000 | |
Merchandise inventory | 12,500 | |
Store supplies | 5,800 | |
Prepaid insurance | 2,400 | |
Store equipment | 42,900 | |
Accumulated depreciation – store equipment | \)15,250 | |
Account payable | 10,000 | |
Common stock | 5,000 | |
Retained earnings | 27,000 | |
Dividends | 2,200 | |
Sales | 111,950 | |
Sales discount | 2,000 | |
Sales return and allowance | 2,200 | |
Cost of goods sold | 38,400 | |
Depreciation expenses – store equipment | 0 | |
Salaries expenses | 35,000 | |
Insurance expense | 0 | |
Rent expense | 15,000 | |
Store supplies expense | 0 | |
Advertising expense | 9,800 | |
Total | \(169,200 | \)169,200 |
Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.
Required
1. Prepare adjusting journal entries to reflect each of the following:
a. Store supplies still available at fiscal year-end amount to \(1,750.
b. Expired insurance, an administrative expense, for the fiscal year is \)1,400.
c. Depreciation expense on store equipment, a selling expense, is \(1,525 for the fiscal year.
d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows \)10,900 of inventory is still available at fiscal year-end.
2. Prepare a multiple-step income statement for fiscal year 2017 that begins with gross sales and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
3. Prepare a single-step income statement for fiscal year 2017.
4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017. (Round ratios to two decimals.)
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.
Refer to QS 4-8 and prepare journal entries to record each of the merchandising transactions assuming that the company records purchases using the gross method and a periodic inventory system.
How does a company that uses a perpetual inventory system determine the amount of inventory shrinkage?
Income statement information for adidas Group, a German footwear, apparel, and accessories manufacturer, for the year ended December 31, 2014, follows. The company applies IFRS and reports its results in millions of euros. Prepare its calendar-year 2014 (1) multiple-step income statement and (2) single-step income statement.
Net income | €564 |
Financial income | 19 |
Financial expenses | 67 |
Operating profit | 883 |
Cost of sales | 7,610 |
Income tax | 271 |
Income before taxes | 835 |
Gross profit | 6,924 |
Royalty and commission income | 102 |
Other operating income | 138 |
Other operating expenses | 6,281 |
Net sales | 14,534 |
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