Chapter 5: Q5-1RQ (page 294)
What is a merchandiser, and what is the name of the merchandise that it sells?
Merchandiser refers to a business concern that sells merchandise inventory to its customers.
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The adjusted trial balance of Rachael Rey Music Company at June 30, 2018, follows:
RACHAEL REY MUSIC COMPANY
Adjusted Trial Balance
June 30, 2018
Balance
Account Title Debit Credit
Cash \(4,000
Accounts Receivable 38,400
Merchandise Inventory 18,100
Office Supplies 300
Furniture 39,900
Accumulated Depreciation-Furniture \)8,200
Accounts Payable 13,800
Salaries Payable 850
Unearned Revenue 7,500
Notes Payable, long-term 17,000
Common Stock 6,000
Retained Earnings 21,350
Dividends 40,000
Sales Revenue 184,000
Cost of Goods Sold 85,500
Selling Expense 18,600
Administrative Expense 12,000
Interest Expense 1,900
Total \(258,700 \)258,700
Requirements
1. Prepare Rachael Rey’s multi-step income statement for the year ended June 30, 2018.
2. Journalize Rachael Rey’s closing entries.
3. Prepare a post-closing trial balance as of June 30, 2018.
Lawrence Appliances had the following purchase transactions. Journalize all necessary transactions using the periodic inventory system. Explanations are not required.
Sep. 4 Purchased inventory of \(6,900 on account from Max Appliance Wholesale, an appliance wholesaler. Terms were 3/15, n/30, FOB shipping point.
4 Paid freight charges, \)480.
10 Returned \(300 of inventory to Max.
17 Paid Max Appliance Wholesale, less return, and discount.
20 Purchased inventory of \)3,900 from MY Appliance, an appliance wholesaler. Terms were 1/10, n/45, FOB destination.
22 Received a $400 allowance from MY Appliance for damaged but usable goods.
29 Paid MY Appliance, less allowance and discount.
What are the two types of inventory accounting systems? Briefly describe each.
What is the Cost of Goods Sold (COGS), and where is it reported?
Consider the following transactions for Burlington Drug Store:
Feb. 2 Burlington buys \(23,800 worth of inventory on account with credit terms of 2/15, n/30, FOB shipping point.
4 Burlington pays a \)50 freight charge.
9 Burlington returns $5,200 of the merchandise due to damage during shipment.
14 Burlington paid the amount due, less return and discount.
Requirements
1. Journalize the purchase transactions. Explanations are not required.
2. In the final analysis, how much did the inventory cost Burlington Drug Store?
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