Chapter 5: Q5-18RQ (page 294)
What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for inventory shrinkage.
Inventory shrinkage refers to an expense that reducesthe inventory values of the business entities.
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Describe the operating cycle of a merchandiser.
Journalize the following sales transactions for Sanborn Camera Store using the periodic inventory system. Explanations are not required.
Dec. 3, Sanborn sold $41,900 of camera equipment on the account; credit terms are 3/15, n/EOM.
17 Sanborn receives payment from the customer on the amount due to less the discount.
Journalize the following transactions that occurred in November 2018 for Julie’s Fun World. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Julie’s Fun World estimates sales returns at the end of each month.
Nov. 4 Purchased merchandise inventory on account from Vera Company, \(5,000. Terms 3/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)100 on November 4 purchase
8 Returned half the inventory purchased on November 4 from Vera Company.
10 Sold merchandise inventory for cash,
11 Sold merchandise inventory to Geary Corporation,
12 Paid freight bill of \(20 on November 10 sale.
13 Sold merchandise inventory to Caldwell Company, \)9,500, on account, terms of n/45. Cost of goods, \(5,225. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount.
17 Received defective inventory as a sales return from the November 13 sale, \)500. Cost of goods, \(275.
18 Purchased inventory of \)3,600 on account from Rainman Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Geary Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Caldwell Company, less return.
29 Purchased inventory from Sandra Corporation for cash,
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.
How is gross profit calculated, and what does it represent?
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