Chapter 5: Q30RQ (page 295)
Highlight the differences in the closing process when using the periodic inventory system rather than the perpetual inventory system.
Answer
The perpetual inventory system records the adjusting entries, while the periodic inventory system does not requireadjusting entries.
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Describe the operating cycle of a merchandiser.
Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?
The records of Farm Quality Steak Company list the following selected accounts for the quarter ended April 30, 2018:
Interest Revenue \( 400 Accounts Payable \) 17,700
Merchandise Inventory 45,000 Accounts Receivable 38,200
Notes Payable, long-term 54,000 Accumulated Depreciation—Equipment 37,700
Salaries Payable 2,800 Common Stock 30,000
Net Sales Revenue 298,000 Retained Earnings 5,380
Rent Expense (Selling) 15,100 Dividends 25,000
Salaries Expense (Administrative) 2,000 Cash 7,100
Office Supplies 6,500 Cost of Goods Sold 154,960
Unearned Revenue 13,100 Equipment 132,000
Interest Expense 2,100 Interest Payable 1,700
Depreciation Expense—Equipment (Administrative) 1,320
Rent Expense (Administrative) 7,100
Utilities Expense (Administrative) 4,600 Salaries Expense (Selling) 6,000
Delivery Expense (Selling) 3,800 Utilities Expense (Selling) 10,000
Requirements
1. Prepare a single-step income statement.
2. Prepare a multi-step income statement.
3. M. Doherty, manager of the company, strives to earn a gross profit percentage of at least 50%. Did Farm Quality achieve this goal? Show your calculations
Question: Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)150 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.
11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.
12 Paid freight bill of \(30 on January 10 sale.
13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.
20 Received cash from Gilmore Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cadet Company.
29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.
How is the net cost of inventory calculated?
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