Appendix PR 6-10B Periodic inventory accounts, multiple-step income statement, closing entries

On June 30, 2014, the balances of the accounts appearing in the ledger of Simkins Company are as follows:


Cash $ 125,000 Sales Discounts $ 66,000
Accounts Receivable 340,000 Purchases 4,100,000
Merchandise Inventory, July 1, 2013 415,000 Purchases Returns and Allowances 32,000
Office Supplies 9,000 Purchases Discounts 13,000
Prepaid Insurance 18,000 Freight In 45,000
Land 300,000 Sales Salaries Expense 580,000
Store Equipment 550,000 Advertising Expense 315,000
Accumulated Depreciation— Delivery Expense 18,000
Store Equipment 190,000 Depreciation Expense—
Office Equipment 250,000 Store Equipment 12,000
Accumulated Depreciation— Miscellaneous Selling Expense 28,000
Office Equipment 110,000 Office Salaries Expense 375,000
Accounts Payable 85,000 Rent Expense 43,000
Salaries Payable 9,000 Insurance Expense 17,000
Unearned Rent 6,000 Office Supplies Expense 5,000
Notes Payable 50,000 Depreciation Expense—
Amy Gant, Capital 825,000 Office Equipment 4,000
Amy Gant, Drawing 275,000 Miscellaneous Administrative Expense 16,000
Sales 6,748,000 Rent Revenue 32,500
Sales Returns and Allowances 92,000 Interest Expense 2,500



Instructions
1. Does Simkins Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2014. The merchandise inventory as of June 30, 2014, was $508,000.
3. Prepare the closing entries for Simkins Company as of June 30, 2014.
4. What would be the net income if the perpetual inventory system had been used?


Answer:
1. Periodic inventory system. Simkins Company uses a periodic inventory system since it maintains accounts for purchases, purchases returns and allowances, purchases discounts, and freight in.





2.
SIMKINS COMPANY
Income Statement
For the Year Ended June 30, 2014
Revenue from sales:
Sales $6,748,000
Less: Sales returns and allowances $ 92,000
Sales discounts 66,000 158,000
Net sales $6,590,000
Cost of merchandise sold:
Merchandise inventory, July 1, 2013 $ 415,000
Purchases $4,100,000
Less: Purchases returns and allowances 32,000
Purchases discounts 13,000
Net purchases $4,055,000
Add freight in 45,000
Cost of merchandise purchased 4,100,000
Cost of merchandise available for sale $4,515,000
Less merchandise inventory, 508,000
June 30, 2014
Cost of merchandise sold 4,007,000
Gross profit $2,583,000
Expenses:
Selling expenses:
Sales salaries expense $ 580,000
Advertising expense 315,000
Delivery expense 18,000
Depreciation expense—store equipment 12,000
Miscellaneous selling expense 28,000
Total selling expenses $ 953,000
Administrative expenses:
Office salaries expense $ 375,000
Rent expense 43,000
Insurance expense 17,000
Office supplies expense 5,000
Depreciation expense—office equipment 4,000
Miscellaneous administrative expense 16,000
Total administrative expenses 460,000
Total operating expenses 1,413,000
Income from operations $1,170,000
Other income and expense:
Rent revenue $ 32,500
Less interest expense 2,500 30,000
Net income $1,200,000
3.

Closing Entries
Merchandise Inventory 508,000
Sales 6,748,000
Purchases Returns and Allowances 32,000
Purchases Discounts 13,000
Rent Revenue 32,500
Income Summary 7,333,500
Income Summary 6,133,500
Merchandise Inventory 415,000
Sales Returns and Allowances 92,000
Sales Discounts 66,000
Purchases 4,100,000
Freight In 45,000
Sales Salaries Expense 580,000
Advertising Expense 315,000
Delivery Expense 18,000
Depreciation Expense—Store Equipment 12,000
Miscellaneous Selling Expense 28,000
Office Salaries Expense 375,000
Rent Expense 43,000
Insurance Expense 17,000
Office Supplies Expense 5,000
Depreciation Expense—Office Equipment 4,000
Miscellaneous Administrative Expense 16,000
Interest Expense 2,500
Income Summary 1,200,000
Amy Gant, Capital 1,200,000
Amy Gant, Capital 275,000
Amy Gant, Drawing 275,000
4. $1,200,000. The same net income as under the periodic inventory system.

Appendix PR 6-9B Sales-related and purchase-related transactions for buyer and seller using periodic inventory system

Selected transactions during April between Swan Company and Bird Company are listed in Problem 6-4B.

Instructions
Journalize the entries to record the transactions for (1) Swan Company and (2) Bird Company assuming that both companies use the periodic inventory system.


Answer:




1.

Apr. 2 Accounts Receivable—Bird Company 32,000
Sales 32,000
2 Accounts Receivable—Bird Company 330
Cash 330
8 Accounts Receivable—Bird Company 49,500
Sales 49,500
8 Delivery Expense 710
Cash 710
12 Sales Returns and Allowances 7,500
Accounts Receivable—Bird Company 7,500
12 Cash 31,690
Sales Discounts 640
Accounts Receivable—Bird Company 32,330
23 Cash 41,580
Sales Discounts 420
Accounts Receivable—Bird Company 42,000
24 Accounts Receivable—Bird Company 67,350
Sales 67,350
30 Cash 67,350
Accounts Receivable—Bird Company 67,350
2.

Apr. 2 Purchases 32,000
Freight In 330
Accounts Payable—Swan Company 32,330
8 Purchases 49,500
Accounts Payable—Swan Company 49,500
12 Accounts Payable—Swan Company 7,500
Purchases Returns and Allowances 7,500
12 Accounts Payable—Swan Company 32,330
Cash 31,690
Purchases Discounts 640
23 Accounts Payable—Swan Company 42,000
Cash 41,580
Purchases Discounts 420
24 Purchases 67,350
Accounts Payable—Swan Company 67,350
26 Freight In 875
Cash 875
30 Accounts Payable—Swan Company 67,350
Cash 67,350

Appendix PR 6-8B Sales-related and purchase-related transactions using periodic inventory system

Selected transactions for Essex Company during July of the current year are listed in Problem 6-3B.

Instructions
Journalize the entries to record the transactions of Essex Company for July using the periodic inventory system.


Answer:


July 3 Purchases 61,200
Freight In 1,450
Accounts Payable—Hamling Co. 62,650
[$72,000 – ($72,000 × 15%)] = $61,200.
5 Purchases 33,450
Accounts Payable—Kester Co. 33,450
6 Accounts Receivable—Parsley Co. 30,150
Sales 30,150
[$45,000 – ($45,000 × 33%)] = $30,150.
7 Accounts Payable—Kester Co. 6,850
Purchases Returns and Allowances 6,850
13 Accounts Payable—Hamling Co. 62,650
Cash 61,426
Purchases Discounts 1,224
15 Accounts Payable—Kester Co. 26,600
Cash 26,068
Purchases Discounts 532
16 Cash 29,547
Sales Discounts 603
Accounts Receivable—Parsley Co. 30,150
19 Cash 108,000
Sales 108,000
22 Accounts Receivable—Tabor Co. 16,650
Sales 16,650
23 Cash 91,200
Sales 91,200
28 Sales Returns and Allowances 3,600
Accounts Receivable—Tabor Co. 3,600
31 Credit Card Expense 1,650
Cash 1,650

Appendix PR 6-7B Purchase-related transactions using periodic inventory system

Selected transactions for Niles Co. during March of the current year are listed in Problem 6-1B.

Instructions
Journalize the entries to record the transactions of Niles Co. for March using the periodic inventory system.


Answer:


Mar. 1 Purchases 43,250
Freight In 650
Accounts Payable—Haas Co. 43,900
5 Purchases 19,175
Accounts Payable—Whitman Co. 19,175
10 Accounts Payable—Haas Co. 43,900
Cash 43,035
Purchases Discounts 865
13 Purchases 15,550
Accounts Payable—Jost Co. 15,550
14 Accounts Payable—Jost Co. 3,750
Purchases Returns and Allowances 3,750
18 Purchases 13,560
Accounts Payable—Fairhurst Company 13,560
18 Freight In 140
Cash 140
19 Purchases 6,500
Accounts Payable—Bickle Co. 6,500
23 Accounts Payable—Jost Co. 11,800
Cash 11,564
Purchases Discounts 236
29 Accounts Payable—Bickle Co. 6,500
Cash 6,370
Purchases Discounts 130
31 Accounts Payable—Fairhurst Company 13,560
Cash 13,560
31 Accounts Payable—Whitman Co. 19,175
Cash 19,175

PR 6-6B Single-step income statement and account form of balance sheet

Selected accounts and related amounts for Kanpur Co. for the fiscal year ended June 30, 2014, are presented in Problem 6-5B.

Instructions
1. Prepare a single-step income statement in the format shown in Exhibit 9.
2. Prepare a statement of owner’s equity.
3. Prepare an account form of balance sheet, assuming that the current portion of the note payable is $7,000.
4. Prepare closing entries as of June 30, 2014.


Answer:






1.
 KANPUR CO.
Income Statement
For the Year Ended June 30, 2014
Revenues:
Net sales $8,925,000
Expenses:
Cost of merchandise sold $5,620,000
Selling expenses 1,321,000
Administrative expenses 632,000
Interest expense 12,000
Total expenses 7,585,000
Net income $1,340,000
2.

KANPUR CO.
Statement of Owner’s Equity
For the Year Ended June 30, 2014
Gerri Faber, capital, July 1, 2013 $ 431,000
Net income for the year $1,340,000
Less withdrawals 300,000
Increase in owner’s equity 1,040,000
Gerri Faber, capital, June 30, 2014 $1,471,000
3.

KANPUR CO.
Balance Sheet
June 30, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $ 92,000 Accounts payable $48,500
Accounts receivable 450,000 Salaries payable 4,000
Merchandise inventory 375,000 Notes payable (current portion) 7,000
Office supplies 10,000 Total current liabilities $ 59,500
Prepaid insurance 12,000 Long-term liabilities:
Total current assets $ 939,000 Notes payable (final payment
Property, plant, and equipment: due 2032) 133,000
Office equipment $220,000 Total liabilities $ 192,500
Less accum. depreciation 58,000 $162,000 Owner’s Equity
Store equipment $650,000 Gerri Faber, capital 1,471,000
Less accum. depreciation 87,500 562,500
Total property, plant, and
equipment 724,500
Total assets $1,663,500 Total liabilities and owner’s equity $1,663,500
4.

2014 Closing Entries
June 30 Sales 9,175,000
Income Summary 9,175,000
30 Income Summary 7,835,000
Sales Returns and Allowances 160,000
Sales Discounts 90,000
Cost of Merchandise Sold 5,620,000
Sales Salaries Expense 850,000
Advertising Expense 420,000
Depreciation Expense—Store Equipment 33,000
Miscellaneous Selling Expense 18,000
Office Salaries Expense 540,000
Rent Expense 48,000
Insurance Expense 24,000
Depreciation Expense—Office Equipment 10,000
Office Supplies Expense 4,000
Miscellaneous Administrative Expense 6,000
Interest Expense 12,000
30 Income Summary 1,340,000
Gerri Faber, Capital 1,340,000
30 Gerri Faber, Capital 300,000
Gerri Faber, Drawing 300,000

PR 6-5B Multiple-step income statement and report form of balance sheet

The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2014:


Cash $ 92,000 Sales $9,175,000
Accounts Receivable 450,000 Sales Returns and Allowances 160,000
Merchandise Inventory 375,000 Sales Discounts 90,000
Office Supplies 10,000 Cost of Merchandise Sold 5,620,000
Prepaid Insurance 12,000 Sales Salaries Expense 850,000
Office Equipment 220,000 Advertising Expense 420,000
Accumulated Depreciation— Depreciation Expense—
Office Equipment 58,000 Store Equipment 33,000
Store Equipment 650,000 Miscellaneous Selling Expense 18,000
Accumulated Depreciation— Office Salaries Expense 540,000
Store Equipment 87,500 Rent Expense 48,000
Accounts Payable 48,500 Insurance Expense 24,000
Salaries Payable 4,000 Depreciation Expense—
Note Payable Office Equipment 10,000
(final payment due 2032) 140,000 Office Supplies Expense 4,000
Gerri Faber, Capital 431,000 Miscellaneous Administrative Exp. 6,000
Gerri Faber, Drawing 300,000 Interest Expense 12,000



Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner’s equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $7,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report-form and account-form balance sheets differ.


Answer:









1.

KANPUR CO.
Income Statement
For the Year Ended June 30, 2014
Revenue from sales:
Sales $9,175,000
Less: Sales returns and allowances $160,000
Sales discounts 90,000 250,000
Net sales $8,925,000
Cost of merchandise sold 5,620,000
Gross profit $3,305,000
Expenses:
Selling expenses:
Sales salaries expense $850,000
Advertising expense 420,000
Depreciation expense—store
equipment 33,000
Miscellaneous selling expense 18,000
Total selling expenses $1,321,000
Administrative expenses:
Office salaries expense $540,000
Rent expense 48,000
Insurance expense 24,000
Depreciation expense—office
equipment 10,000
Office supplies expense 4,000
Miscellaneous administrative expense 6,000
Total administrative expenses 632,000
Total operating expenses 1,953,000
Income from operations $1,352,000
Other expense:
Interest expense 12,000
Net income $1,340,000
2.

KANPUR CO.
Statement of Owner’s Equity
For the Year Ended June 30, 2014
Gerri Faber, capital, July 1, 2013 $ 431,000
Net income for the year $1,340,000
Less withdrawals 300,000
Increase in owner’s equity 1,040,000
Gerri Faber, capital, June 30, 2014 $1,471,000
3.

KANPUR CO.
Balance Sheet
June 30, 2014
Assets
Current assets:
Cash $ 92,000
Accounts receivable 450,000
Merchandise inventory 375,000
Office supplies 10,000
Prepaid insurance 12,000
Total current assets $ 939,000
Property, plant, and equipment:
Office equipment $220,000
Less accumulated depreciation 58,000 $162,000
Store equipment $650,000
Less accumulated depreciation 87,500 562,500
Total property, plant, and equipment 724,500
Total assets $1,663,500
Liabilities
Current liabilities:
Accounts payable $ 48,500
Salaries payable 4,000
Note payable (current portion) 7,000
Total current liabilities $ 59,500
Long-term liabilities:
Note payable (final payment due 2032) 133,000
Total liabilities $ 192,500
Owner’s Equity
Gerri Faber, capital 1,471,000
Total liabilities and owner’s equity $1,663,500
4. a. The multiple-step form of income statement contains various sections for
revenues and expenses, with intermediate balances, and concludes with
net income. In the single-step form, the total of all expenses is deducted
from the total of all revenues. There are no intermediate balances.
b. In the report form of balance sheet, the assets, liabilities, and owner’s
equity are presented in that order in a downward sequence. In the
account form, the assets are listed on the left-hand side, and the liabilities
and owner’s equity are listed on the right-hand side.

PR 6-4B Sales-related and purchase-related transactions for seller and buyer

The following selected transactions were completed during April between Swan Company and Bird Company:

Apr. 2. Swan Company sold merchandise on account to Bird Company, $32,000, terms FOB shipping point, 2/10, n/30. Swan Company paid freight of $330, which was added to the invoice. The cost of the merchandise sold was $19,200.
 8. Swan Company sold merchandise on account to Bird Company, $49,500, terms destination, 1/15, n/eom. The cost of the merchandise sold was $29,700.
 8. Swan Company paid freight of $710 for delivery of merchandise sold to Bird Company on April 8.
12. Bird Company returned $7,500 of merchandise purchased on account on April 8 from Swan Company. The cost of the merchandise returned was $4,800.
12. Bird Company paid Swan Company for purchase of April 2, less discount.
23. Bird Company paid Swan Company for purchase of April 8, less discount and less return of April 12.
24. Swan Company sold merchandise on account to Bird Company, $67,350, terms FOB shipping point, n/eom. The cost of the merchandise sold was $40,400.
26. Bird Company paid freight of $875 on April 24 purchase from Swan Company.
30. Bird Company paid Swan Company on account for purchase of April 24.

Instructions
Journalize the April transactions for (1) Swan Company and (2) Bird Company.


Answer:




1.

Apr. 2 Accounts Receivable—Bird Company 32,000
Sales 32,000
2 Accounts Receivable—Bird Company 330
Cash 330
2 Cost of Merchandise Sold 19,200
Merchandise Inventory 19,200
8 Accounts Receivable—Bird Company 49,500
Sales 49,500
8 Cost of Merchandise Sold 29,700
Merchandise Inventory 29,700
8 Delivery Expense 710
Cash 710
12 Sales Returns and Allowances 7,500
Accounts Receivable—Bird Company 7,500
12 Merchandise Inventory 4,800
Cost of Merchandise Sold 4,800
12 Cash 31,690
Sales Discounts 640
Accounts Receivable—Bird Company 32,330
23 Cash 41,580
Sales Discounts 420
Accounts Receivable—Bird Company 42,000
24 Accounts Receivable—Bird Company 67,350
Sales 67,350
24 Cost of Merchandise Sold 40,400
Merchandise Inventory 40,400
30 Cash 67,350
Accounts Receivable—Bird Company 67,350
2.

Apr. 2 Merchandise Inventory 32,330
Accounts Payable—Swan Company 32,330
$32,000 + $330 = $32,330.
8 Merchandise Inventory 49,500
Accounts Payable—Swan Company 49,500
12 Accounts Payable—Swan Company 7,500
Merchandise Inventory 7,500
12 Accounts Payable—Swan Company 32,330
Cash 31,690
Merchandise Inventory 640
23 Accounts Payable—Swan Company 42,000
Cash 41,580
Merchandise Inventory 420
24 Merchandise Inventory 67,350
Accounts Payable—Swan Company 67,350
26 Merchandise Inventory 875
Cash 875
30 Accounts Payable—Swan Company 67,350
Cash 67,350

PR 6-3B Sales-related and purchase-related transactions

The following were selected from among the transactions completed by Essex Company during July of the current year:


July 3. Purchased merchandise on account from Hamling Co., list price $72,000, trade discount 15%, terms FOB shipping point, 2/10, n/30, with prepaid freight of $1,450 added to the invoice.
 5. Purchased merchandise on account from Kester Co., $33,450, terms FOB destination, 2/10, n/30.
 6. Sold merchandise on account to Parsley Co., list price $45,000, trade discount 33%, terms 2/10, n/30. The cost of the merchandise sold was $25,000.
 7. Returned $6,850 of merchandise purchased on July 5 from Kester Co.
13. Paid Hamling Co. on account for purchase of July 3, less discount.
15. Paid Kester Co. on account for purchase of July 5, less return of July 7 and discount.
16. Received cash on account from sale of July 6 to Parsley Co., less discount.
19. Sold merchandise on MasterCard, $108,000. The cost of the merchandise sold was $64,800.
22. Sold merchandise on account to Tabor Co., $16,650, terms 2/10, n/30. The cost of the merchandise sold was $10,000.
23. Sold merchandise for cash, $91,200. The cost of the merchandise sold was $55,000.
28. Received merchandise returned by Tabor Co. from sale on July 22, $3,600. The cost of the returned merchandise was $2,000.
31. Paid MasterCard service fee of $1,650.


Instructions
Journalize the transactions.


Answer:




July 3 Merchandise Inventory 62,650
Accounts Payable—Hamling Co. 62,650
[$72,000 – ($72,000 × 15%)] = $61,200.
$61,200 + $1,450 = $62,650.
5 Merchandise Inventory 33,450
Accounts Payable—Kester Co. 33,450
6 Accounts Receivable—Parsley Co. 30,150
Sales 30,150
[$45,000 – ($45,000 × 33%)] = $30,150.
6 Cost of Merchandise Sold 25,000
Merchandise Inventory 25,000
7 Accounts Payable—Kester Co. 6,850
Merchandise Inventory 6,850
13 Accounts Payable—Hamling Co. 62,650
Cash 61,426
Merchandise Inventory 1,224
15 Accounts Payable—Kester Co. 26,600
Cash 26,068
Merchandise Inventory 532
16 Cash 29,547
Sales Discounts 603
Accounts Receivable—Parsley Co. 30,150
19 Cash 108,000
Sales 108,000
19 Cost of Merchandise Sold 64,800
Merchandise Inventory 64,800
22 Accounts Receivable—Tabor Co. 16,650
Sales 16,650
22 Cost of Merchandise Sold 10,000
Merchandise Inventory 10,000
July 23 Cash 91,200
Sales 91,200
23 Cost of Merchandise Sold 55,000
Merchandise Inventory 55,000
28 Sales Returns and Allowances 3,600
Accounts Receivable—Tabor Co. 3,600
28 Merchandise Inventory 2,000
Cost of Merchandise Sold 2,000
31 Credit Card Expense 1,650
Cash 1,650

PR 6-2B Sales-related transactions

The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:

July 1. Sold merchandise on account to Landscapes Co., $33,450, terms FOB shipping point, n/eom. The cost of merchandise sold was $20,000.
2. Sold merchandise for $86,000 plus 8% sales tax to retail cash customers. The cost of merchandise sold was $51,600.
5. Sold merchandise on account to Peacock Company, $17,500, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $10,000.
 8. Sold merchandise for $112,000 plus 8% sales tax to retail customers who used VISA cards. The cost of merchandise sold was $67,200.
13. Sold merchandise to customers who used MasterCard cards, $96,000. The cost of merchandise sold was $57,600.
14. Sold merchandise on account to Loeb Co., $16,000, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $9,000.
15. Received check for amount due from Peacock Company for sale on July 5.
16. Issued credit memo for $3,000 to Loeb Co. for merchandise returned from sale on July 14. The cost of the merchandise returned was $1,800.
18. Sold merchandise on account to Jennings Company, $11,350, terms FOB shipping point, 2/10, n/30. Paid $475 for freight and added it to the invoice. The cost of merchandise sold was $6,800.
24. Received check for amount due from Loeb Co. for sale on July 14 less credit memo of July 16 and discount.
28. Received check for amount due from Jennings Company for sale of July 18.
31. Paid Black Lab Delivery Service $8,550 for merchandise delivered during July to customers under shipping terms of FOB destination.
31. Received check for amount due from Landscapes Co. for sale of July 1.
Aug. 3. Paid Hays Federal Bank $3,770 for service fees for handling MasterCard and VISA sales during July.
10. Paid $41,260 to state sales tax division for taxes owed on sales.

Instructions
Journalize the entries to record the transactions of Green Lawn Supplies Co.


Answer:




July 1 Accounts Receivable—Landscapes Co. 33,450
Sales 33,450
1 Cost of Merchandise Sold 20,000
Merchandise Inventory 20,000
2 Cash 92,880
Sales 86,000
Sales Tax Payable 6,880
2 Cost of Merchandise Sold 51,600
Merchandise Inventory 51,600
5 Accounts Receivable—Peacock Company 17,500
Sales 17,500
5 Cost of Merchandise Sold 10,000
Merchandise Inventory 10,000
8 Cash 120,960
Sales 112,000
Sales Tax Payable 8,960
8 Cost of Merchandise Sold 67,200
Merchandise Inventory 67,200
13 Cash 96,000
Sales 96,000
13 Cost of Merchandise Sold 57,600
Merchandise Inventory 57,600
14 Accounts Receivable—Loeb Co. 16,000
Sales 16,000
14 Cost of Merchandise Sold 9,000
Merchandise Inventory 9,000
15 Cash 17,325
Sales Discounts 175
Accounts Receivable—Peacock Company 17,500
July 16 Sales Returns and Allowances 3,000
Accounts Receivable—Loeb Co. 3,000
16 Merchandise Inventory 1,800
Cost of Merchandise Sold 1,800
18 Accounts Receivable—Jennings Company 11,350
Sales 11,350
18 Accounts Receivable—Jennings Company 475
Cash 475
18 Cost of Merchandise Sold 6,800
Merchandise Inventory 6,800
24 Cash 12,870
Sales Discounts 130
Accounts Receivable—Loeb Co. 13,000
28 Cash 11,598
Sales Discounts 227
Accounts Receivable—Jennings Company 11,825
31 Delivery Expense 8,550
Cash 8,550
31 Cash 33,450
Accounts Receivable—Landscapes Co. 33,450
Aug. 3 Credit Card Expense 3,770
Cash 3,770
10 Sales Tax Payable 41,260
Cash 41,260

PR 6-1B Purchase-related transactions

The following selected transactions were completed by Niles Co. during March of the current year:


Mar. 1. Purchased merchandise from Haas Co., $43,250, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $650 was added to the invoice.
 5. Purchased merchandise from Whitman Co., $19,175, terms FOB destination, n/30.
10. Paid Haas Co. for invoice of March 1, less discount.
13. Purchased merchandise from Jost Co., $15,550, terms FOB destination, 2/10, n/30.
14. Issued debit memo to Jost Co. for $3,750 of merchandise returned from purchase on March 13.
18. Purchased merchandise from Fairhurst Company, $13,560, terms FOB shipping point, n/eom.
18. Paid freight of $140 on March 18 purchase from Fairhurst Company.
19. Purchased merchandise from Bickle Co., $6,500, terms FOB destination, 2/10, n/30.
23. Paid Jost Co. for invoice of March 13, less debit memo of March 14 and discount.
29. Paid Bickle Co. for invoice of March 19, less discount.
31. Paid Fairhurst Company for invoice of March 18.
31. Paid Whitman Co. for invoice of March 5.


Instructions
Journalize the entries to record the transactions of Niles Co. for March.


Answer:


Mar. 1 Merchandise Inventory 43,900
Accounts Payable—Haas Co. 43,900
5 Merchandise Inventory 19,175
Accounts Payable—Whitman Co. 19,175
10 Accounts Payable—Haas Co. 43,900
Cash 43,035
Merchandise Inventory 865
13 Merchandise Inventory 15,550
Accounts Payable—Jost Co. 15,550
14 Accounts Payable—Jost Co. 3,750
Merchandise Inventory 3,750
18 Merchandise Inventory 13,560
Accounts Payable—Fairhurst Company 13,560
18 Merchandise Inventory 140
Cash 140
19 Merchandise Inventory 6,500
Accounts Payable—Bickle Co. 6,500
23 Accounts Payable—Jost Co. 11,800
Cash 11,564
Merchandise Inventory 236
29 Accounts Payable—Bickle Co. 6,500
Cash 6,370
Merchandise Inventory 130
31 Accounts Payable—Fairhurst Company 13,560
Cash 13,560
31 Accounts Payable—Whitman Co. 19,175
Cash 19,175

Appendix PR 6-10A Periodic inventory accounts, multiple-step income statement, closing entries

On December 31, 2014, the balances of the accounts appearing in the ledger of Wyman Company are as follows:


Cash $ 13,500 Sales Discounts $ 29,000
Accounts Receivable 72,000 Purchases 2,650,000
Merchandise Inventory, Purchases Returns and Allowances 93,000
January 1, 2014 257,000 Purchases Discounts 37,000
Office Supplies 3,000 Freight In 48,000
Prepaid Insurance 4,500 Sales Salaries Expense 300,000
Land 150,000 Advertising Expense 45,000
Store Equipment 270,000 Delivery Expense 9,000
Accumulated Depreciation— Depreciation Expense—
Store Equipment 55,900 Store Equipment 6,000
Office Equipment 78,500 Miscellaneous Selling Expense 12,000
Accumulated Depreciation— Office Salaries Expense 175,000
Office Equipment 16,000 Rent Expense 28,000
Accounts Payable 27,800 Insurance Expense 3,000
Salaries Payable 3,000 Office Supplies Expense 2,000
Unearned Rent 8,300 Depreciation Expense—
Notes Payable 50,000 Office Equipment 1,500
Shirley Wyman, Capital 580,500 Miscellaneous Administrative Expense 3,500
Shirley Wyman, Drawing 25,000 Rent Revenue 7,000
Sales 3,355,000 Interest Expense 2,000
Sales Returns and Allowances 46,000



Instructions
1. Does Wyman Company use a periodic or perpetual inventory system? Explain.
2. Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 2014. The merchandise inventory as of December 31, 2014, was $305,000.
3. Prepare the closing entries for Wyman Company as of December 31, 2014.
4. What would be the net income if the perpetual inventory system had been used?


Answer:
1. Periodic inventory system. Wyman Company uses a periodic inventory system since it maintains accounts for purchases, purchases returns and allowances, purchases discounts, and freight in.

2.

WYMAN COMPANY
Income Statement
For the Year Ended December 31, 2014
Revenue from sales:
Sales $3,355,000
Less: Sales returns and allowances $ 46,000
Sales discounts 29,000 75,000
Net sales $3,280,000
Cost of merchandise sold:
Merchandise inventory, January 1, 2014 $ 257,000
Purchases $2,650,000
Less: Purchases returns and allowances 93,000
Purchases discounts 37,000
Net purchases $2,520,000
Add freight in 48,000
Cost of merchandise purchased 2,568,000
Cost of merchandise available for sale $2,825,000
Less merchandise inventory, 305,000
December 31, 2014
Cost of merchandise sold 2,520,000
Gross profit $ 760,000
Expenses:
Selling expenses:
Sales salaries expense $ 300,000
Advertising expense 45,000
Delivery expense 9,000
Depreciation expense—store equipment 6,000
Miscellaneous selling expense 12,000
Total selling expenses $ 372,000
Administrative expenses:
Office salaries expense $ 175,000
Rent expense 28,000
Insurance expense 3,000
Office supplies expense 2,000
Depreciation expense—office equipment 1,500
Miscellaneous administrative expense 3,500
Total administrative expenses 213,000
Total operating expenses 585,000
Income from operations $ 175,000
Other income and expense:
Rent revenue $ 7,000
Less interest expense 2,000 5,000
Net income $ 180,000
3. Merchandise Inventory 305,000
Sales 3,355,000
Purchases Returns and Allowances 93,000
Purchases Discounts 37,000
Rent Revenue 7,000
Income Summary 3,797,000
Income Summary 3,617,000
Merchandise Inventory 257,000
Sales Returns and Allowances 46,000
Sales Discounts 29,000
Purchases 2,650,000
Freight In 48,000
Sales Salaries Expense 300,000
Advertising Expense 45,000
Delivery Expense 9,000
Depreciation Expense—Store Equipment 6,000
Miscellaneous Selling Expense 12,000
Office Salaries Expense 175,000
Rent Expense 28,000
Insurance Expense 3,000
Office Supplies Expense 2,000
Depreciation Expense—Office Equipment 1,500
Miscellaneous Administrative Expense 3,500
Interest Expense 2,000
Income Summary 180,000
Shirley Wyman, Capital 180,000
Shirley Wyman, Capital 25,000
Shirley Wyman, Drawing 25,000

4. $180,000. The same net income as under the periodic inventory system.

Appendix PR 6-9A Sales-related and purchase-related transactions for buyer and seller using periodic inventory system

Selected transactions during August between Summit Company and Beartooth Co. are listed in Problem 6-4A.

Instructions
Journalize the entries to record the transactions for (1) Summit Company and (2) Beartooth Co., assuming that both companies use the periodic inventory system.


Answer:




1.

Aug. 1 Accounts Receivable—Beartooth Co. 48,000
Sales 48,000
2 Delivery Expense 1,150
Cash 1,150
5 Accounts Receivable—Beartooth Co. 66,000
Sales 66,000
6 Sales Returns and Allowances 10,500
Accounts Receivable—Beartooth Co. 10,500
15 Accounts Receivable—Beartooth Co. 58,700
Sales 58,700
15 Accounts Receivable—Beartooth Co. 1,675
Cash 1,675
16 Cash 36,750
Sales Discounts 750
Accounts Receivable—Beartooth Co. 37,500
25 Cash 59,788
Sales Discounts 587
Accounts Receivable—Beartooth Co. 60,375
31 Cash 66,000
Accounts Receivable—Beartooth Co. 66,000
2.

Aug. 1 Purchases 48,000
Accounts Payable—Summit Company 48,000
5 Purchases 66,000
Accounts Payable—Summit Company 66,000
6 Accounts Payable—Summit Company 10,500
Purchases Returns and Allowances 10,500
9 Freight In 2,300
Cash 2,300
15 Purchases 58,700
Freight In 1,675
Accounts Payable—Summit Company 60,375
16 Accounts Payable—Summit Company 37,500
Cash 36,750
Purchases Discounts 750
25 Accounts Payable—Summit Company 60,375
Cash 59,788
Purchases Discounts 587
31 Accounts Payable—Summit Company 66,000
Cash 66,000

Appendix PR 6-8A Sales-related and purchase-related transactions using periodic inventory system

Selected transactions for Babcock Company during November of the current year are listed in Problem 6-3A.

Instructions
Journalize the entries to record the transactions of Babcock Company for November using the periodic inventory system.


Answer:


Nov. 3 Purchases 63,750
Accounts Payable—Moonlight Co. 63,750
[$85,000 – ($85,000 × 25%)] = $63,750.
4 Cash 37,680
Sales 37,680
5 Purchases 47,500
Freight In 810
Accounts Payable—Papoose Creek Co. 48,310
6 Accounts Payable—Moonlight Co. 13,500
Purchases Returns and Allowances 13,500
11 Accounts Receivable—Quinn Co. 15,600
Sales 15,600
[$24,000 – ($24,000 × 35%)] = $15,600.
13 Accounts Payable—Moonlight Co. 50,250
Cash 49,245
Purchases Discounts 1,005
14 Cash 236,000
Sales 236,000
15 Accounts Payable—Papoose Creek Co. 48,310
Cash 47,360
Purchases Discounts 950
21 Cash 15,444
Sales Discounts 156
Accounts Receivable—Quinn Co. 15,600
24 Accounts Receivable—Rabel Co. 56,900
Sales 56,900
28 Credit Card Expense 3,540
Cash 3,540
30 Sales Returns and Allowances 8,400
Accounts Receivable—Rabel Co. 8,400

Appendix PR 6-7A Purchase-related transactions using periodic inventory system

Selected transactions for Capers Company during October of the current year are listed in Problem 6-1A.

Instructions
Journalize the entries to record the transactions of Capers Company for October using the periodic inventory system.


Answer:

Oct. 1 Purchases 14,448
Accounts Payable—UK Imports Co. 14,448
3 Purchases 9,950
Freight In 220
Accounts Payable—Hoagie Co. 10,170
4 Purchases 13,650
Accounts Payable—Taco Co. 13,650
6 Accounts Payable—Taco Co. 4,550
Purchases Returns and Allowances 4,550
13 Accounts Payable—Hoagie Co. 10,170
Cash 9,971
Purchases Discounts 199
14 Accounts Payable—Taco Co. 9,100
Cash 8,918
Purchases Discounts 182
19 Purchases 27,300
Accounts Payable—Veggie Co. 27,300
19 Freight In 400
Cash 400
20 Purchases 22,000
Accounts Payable—Caesar Salad Co. 22,000
30 Accounts Payable—Caesar Salad Co. 22,000
Cash 21,780
Purchases Discounts 220
31 Accounts Payable—UK Imports Co. 14,448
Cash 14,448
31 Accounts Payable—Veggie Co. 27,300
Cash 27,300

PR 6-6A Single-step income statement and account form of balance sheet

Selected accounts and related amounts for Gloucester Co. for the fiscal year ended August 31, 2014, are presented in Problem 6-5A.


Instructions
1. Prepare a single-step income statement in the format shown in Exhibit 9.
2. Prepare a statement of owner’s equity.
3. Prepare an account form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Prepare closing entries as of August 31, 2014.


Answer:






1.
 GLOUCESTER CO.
Income Statement
For the Year Ended August 31, 2014
Revenues:
Net sales $4,517,000
Expenses:
Cost of merchandise sold $2,650,000
Selling expenses 1,008,000
Administrative expenses 537,000
Interest expense 12,000
Total expenses 4,207,000
Net income $ 310,000
2.
 GLOUCESTER CO.
Statement of Owner’s Equity
For the Year Ended August 31, 2014
Mia Reynolds, capital, September 1, 2013 $675,000
Net income for the year $310,000
Less withdrawals 75,000
Increase in owner’s equity 235,000
Mia Reynolds, capital, August 31, 2014 $910,000
3.
 GLOUCESTER CO.
Balance Sheet
August 31, 2014
Assets Liabilities
Current assets: Current liabilities:
Cash $125,000 Accounts payable $193,000
Accounts receivable 335,000 Salaries payable 12,000
Merchandise inventory 380,000 Notes payable (current portion) 16,000
Office supplies 12,000 Total current liabilities $ 221,000
Prepaid insurance 9,000 Long-term liabilities:
Total current assets $ 861,000 Notes payable (final payment
Property, plant, and equipment: due 2037) 384,000
Office equipment $275,000 Total liabilities $ 605,000
Less accumulated depreciation 187,000 $ 88,000 Owner’s Equity
Store equipment $859,000 Mia Reynolds, capital 910,000
Less accumulated depreciation 293,000 566,000
Total property, plant, and
equipment 654,000
Total assets $1,515,000 Total liabilities and owner’s equity $1,515,000
4.

2014 Closing Entries
Aug. 31 Sales 4,576,000
Income Summary 4,576,000
31 Income Summary 4,266,000
Sales Returns and Allowances 31,000
Sales Discounts 28,000
Cost of Merchandise Sold 2,650,000
Sales Salaries Expense 745,000
Advertising Expense 205,000
Depreciation Expense—Store Equipment 40,000
Miscellaneous Selling Expense 18,000
Office Salaries Expense 410,000
Rent Expense 60,000
Depreciation Expense—Office Equipment 30,000
Insurance Expense 18,000
Office Supplies Expense 11,000
Miscellaneous Administrative Expense 8,000
Interest Expense 12,000
31 Income Summary 310,000
Mia Reynolds, Capital 310,000
31 Mia Reynolds, Capital 75,000
Mia Reynolds, Drawing 75,000