Chapter 5: Q5-5RQ (page 294)
How is gross profit calculated, and what does it represent?
Gross profit is the difference between the net sales revenues earned by a business concern and the cost of goods sold.
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The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:
ROCKIN ROBBIN DANCE COMPANY
Adjusted Trial Balance
April 30, 2018
Balance
Account Title Debit Credit
Cash \(4,400
Accounts Receivable 38,000
Merchandise Inventory 17,800
Office Supplies 850
Furniture 39,900
Accumulated Depreciation-Furniture \)8,300
Accounts Payable 14,100
Salaries Payable 1,000
Unearned Revenue 6,500
Notes Payable, long-term 12,000
Common Stock 5,000
Retained Earnings 36,150
Dividends 40,000
Sales Revenue 178,500
Cost of Goods Sold 83,700
Selling Expense 19,000
Administrative Expense 16,000
Interest Expense 1,900
Total \(261,550 \)261,550
Requirements
1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018.
2. Journalize Rockin Robbin’s closing entries.
3. Prepare a post-closing trial balance as of April 30, 2018.
Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.
Requirements
1. Journalize the adjustment for inventory shrinkage.
2. Journalize the adjustment for estimated sales returns.
What financial statement is merchandise inventory reported on, and in what section?
Taylor Department Store uses a periodic inventory system. The adjusted trial balance of Taylor Department Store at December 31, 2018, follows:
TAYLOR DEPARTMENT STORE
Adjusted Trial Balance
December 31, 2018
Balance
Account Title Debit Credit
Cash \(7,900
Accounts Receivable 85,300
Merchandise Inventory (beginning) 37,600
Office Supplies 300
Furniture 83,000
Accumulated Depreciation-Furniture \)18,500
Accounts Payable 28,500
Salaries Payable 2,900
Unearned Revenue 14,500
Notes Payable, long-term 32,000
Common Stock 20,000
Retained Earnings 45,400
Dividends 89,000
Sales Revenue 380,800
Purchases 284,000
Purchase Returns and Allowances 110,000
Purchase Discounts 7,000
Freight-In 100
Selling Expense 42,900
Administrative Expense 26,300
Interest Expense 3,200
Total \(659,600 \)659,600
Requirements
1. Prepare Taylor Department Store’s multi-step income statement for the year ended December 31, 2018. Assume ending Merchandise Inventory is $36,700.
2. Journalize Taylor Department Store’s closing entries.
Rocky RV Center’s accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold \( 372,000 Accumulated Depreciation—Building \) 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense—Building 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
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