Chapter 5: Q5-21RQ (page 294)
Describe the multi-step income statement.
A multi-step income statement presents the operating and non-operating revenues and expenses separately to reflect thenet income of a business.
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M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold for the year.
Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:
Selling Expenses $ 10,500
Interest Revenue 1,000
Net Sales Revenue 113,500
Cost of Goods Sold 85,000
Administrative Expenses 8,000
Determine the gross profit percentage for the year ended December 31, 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.
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.
Journalize the following sales transactions for Salem Sportswear. Explanations are not required. The company estimates sales returns at the end of each month.
Jul. 1 Salem sold \(20,000 of men’s sportswear for cash. Cost of goods sold is \)10,000.
3 Salem sold \(62,000 of women’s sportswear on account, credit terms are 3/10, n/30. Cost of goods is \)31,000.
5 Salem received a \(4,500 sales return on damaged goods from the customer on July 1. Cost of goods damaged is \)2,250.
10 Salem receives payment from the customer on the amount due, less discount.
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