Chapter 5: Q5-14RQ (page 294)
Under the new revenue recognition standard, how is the sale of inventory recorded?
The sale of inventory is recorded at the net price under the newrevenue recognition standard.
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Describe the single-step income statement.
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
Journalize the following transactions for Master Bicycles using the periodic inventory system. Explanations are not required.
Nov. 2 Purchased \(3,400 of merchandise inventory under terms 2/10, n/EOM, and FOB shipping point.
6 Returned \)800 of defective merchandise purchased on November 2.
8 Paid freight bill of \(100 on November 2 purchase.
10 Sold merchandise inventory on account for \)6,100. Payment terms were 3/15, n/45.
11 Paid amount owed on credit purchase of November 2, less the return and the discount.
22 Received cash from November 10 customer in full settlement of their debt, less the discount.
Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.
July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.
3 Return of \)4,000 of the computers to the vendor.
9 Payment made on the account.
12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.
26 Received payment from customer on balance due.
Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.
Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.
Jan. 4 Sold \(16,000 of antiques on the account; credit terms are n/30. The cost of goods is \)8,000.
8 Received a \(300 sales return on damaged goods from the customer. The cost of goods damaged is \)150.
13 Antique Mall received payment from the customer on the amount due from Jan. 4, less the return.
20 Sold \(4,900 of antiques on the account; credit terms are 1/10, n/45, FOB destination. The cost of goods is \)2,450.
20 Antique Mall paid $70 on freight out.
29 Received payment from the customer on the amount due from Jan. 20, less the discount.
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