CHAPTER 5:

MERCHANDISING OPERATIONS

PROBLEM 01 – JOURNAL ENTRIES

(a)        SEINFELD COMPANY

GENERAL JOURNAL

Date 20X1		Description	Post Ref.	Debit	Credit
Mar.	8 12 17 20	Accounts Receivable Sales            Cash To record goods sold to Simpson Stores, F.O.B. shipping point, and paid freight. Sales Returns and Allowances Accounts Receivable To record credit memo issued to Simpson Stores for returned goods. Cash Sales Discounts        Accounts Receivable To record payment received in full from Simpson Stores. Sales Returns and Allowances Sales Discounts         Cash To record payment of Simpson Stores for returned goods.		2,640 200 2,392 48 100	2,600 40 200 2,440 2 98

(b)

                                                  SIMPSON STORES

GENERAL JOURNAL

Date 20X1		Description	Post Ref.	Debit	Credit
Mar.	8 12 17 20	Purchases Transportation in          Accounts Payable To record goods purchased F.O. B. shipping point from Seinfeld co.: seller paid freight. Accounts Payable      Purchases Returns and Allowances To record credit memo received for goods returned to Seinfeld Co. Accounts Payable       Purchases Discounts       Cash To record payment of Seinfeld Co. in full. Cash Purchase Discounts        Purchases Returns and Allowances To record cheque received for goods returned to Seinfeld Co.		2,600 40 200 2,440 98 2	2,640 200 48 2,392 100

PROBLEM 02 – JOURNAL ENTRIES

GENERAL JOURNAL

20X1	Description	Debit	Credit
Aug 1 4 5 6 7 8 9 10 14	Purchases Accounts Payable To record purchases from Sally, Inc. 2/10,n30, FOB shipping point freight collected. Purchases Accounts Payable To record purchases from Neelam Co.,2/10 n30, FOB, destination, freight prepaid. Transportation in Cash To record freight paid on Sally Inc. shipment. Accounts Receivable Sales To record sales to Solid Corporation. Accounts Receivable Cash To record freight paid on shipment to Solid Corporation. Accounts Payable Purchases Returns and Allowances To record goods returned to Sally Inc. Sales Returns and Allowances Accounts Receivable To record credit memo issued to Solid for goods returned. Accounts Payable Purchases Discounts Cash To record paying Sally, Inc. the amount due with discount Purchases Accounts Payable To record purchases from Delgado 1/10 n30 FOB shipping point, freight collected.	750 1,400 60 800 45 50 100 700 1,200	750 1,400 60 800 45 50 100 70 630 1,200

15 17 18 19 20 20 25 28

Transportation In      Cash To record freight paid on Delgado shipment. Cash Sales Discounts      Accounts Receivable To record amount due received from Solid Corporation. Accounts Receivable     Sales To record sales to Watson Inc. Accounts Payable     Cash To record paying Neelam Company the amount due. Accounts Receivable     Cash To record freight paid on Watson shipment. Accounts Payable   Purchase Returns and Allowances To record credit memo received for price adjustment from Delgado Inc. Accounts Payable     Cash To record paying Delgado Inc., the amount due. ($1,600 less 25% trade discount less the $200 price adjustment) Cash     Sales Discounts Accounts Receivable To record amount due received from Watson Inc.

60 731 14 2,200 1,400 70 200 1,000 2,226 44

60 745 2,200 1,400 70 200 1,000 2,270

PROBLEM 03 – INCOME STATEMENT PREPARATION

NEWMAN WHOLESALE COMPANY INCOME STATEMENT

FOR THE MONTH ENDED MARCH 31, 20X1

PROBLEM 04 – INCOME STATEMENT PREPARATION

a) Springer Trading Company Income Statement

For the year Ended December 31, 20X1

Sales Less: Sales Returns and Allowances Sales Discounts Net Sales Cost of Goods Sold: Inventory, January 1 Add: Net Cost of Purchases Purchases  Less: Purchase Returns and Allowances       $2,600 Purchase Discounts                           3,600 Add: transportation in Cost of goods available for sale Less: Inventory, December 31 Cost of Goods sold Gross Profit on Sales Operating Expenses Selling Expenses Delivery Expenses Sales Salaries Expense Advertising Expenses Depreciation Expense- Delivery Equipment Insurance Expense Total Selling Expenses Administrative Expenses Rent Expenses Office Supplies Expenses Utilities Expenses Depreciation Expenses – Furniture and Fixtures Office Supplies Expense Insurance Expense Total Administrative Expense Total Operating Expenses    Net Income

185,000 6,200 178,800 4,800 6,200 40,600 2,400 5,000 1,500 7,500 22,300 1,200 800 600 500

3,100 2,900 49,000 183,600 232,500 61,000 55,700 32,900

275,000 6,000 269,000 171,600 97,400 88,600 8,800

b) SPRINGER TRADING COMPANY BALANCE SHEET

DECEMBER 31, 20X1

ASSETS Current Assets:   Cash Accounts Receivable Inventory Prepaid Insurance Office Supplies on Hand Total Current Assets Long Term Assets: Furniture and Fixtures Less: Accumulated depreciation Delivery Equipment Less: Accumulated Depreciation Total Long Term Assets Total Assets LIABILITIES AND OWNERS' EQUITY Current Liabilities: Accounts Payable Salaries Payable Total Current Liabilities Long Term Liabilities: Notes Payable Total Liabilities Owners' Equity: R. Springer, Capital Total Liabilities and Owners' Equity * $72,000 Beginning Balance + $8,800 Net Income-$4,000 Withdrawals

12,500 3,300 40,000 13,000

6,200 15,000 61,000 400 1,200 9,200 27,000 22,300 900

83,800 36,200 120,000 23,200 20,000 43,200 76,800* 120,000

(c)

Date 20X1	Description	Ref	Debit	Credit
Dec.31 31 31 31 31	ADUSTING ENTRIES Insurance Expense    Prepaid Insurance To record expired Insurance. Office Supplies Expense    Office Supplies on Hand To record office supplies used. Depreciation Expense-Furniture and Fixtures Accumulated Depreciation – Furniture and Fixtures To record depreciation for the year. Depreciation Expense-Delivery Equipment Accumulated Depreciation – Delivery Equipment To record depreciation for the year. Sales Salaries Expense Office Salaries Expense Salaries Payable To record accrued salaries at December 31.		2,000 600 800 5,000 600 300	2,000 600 800 5,000 900

PROBLEM 05 – INCOME STATEMENT

CRAFTY INC. INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 20X1

Sales	$77,000	$240,000
Cost of Goods Sold:
Inventory, January 1
Add: Purchases	155,000
Cost of Goods sold available for sale	232,000
Less: Inventory, December 31	75,000
Cost of Goods sold		157,000
Gross Profit on Sales		$83,000
Operating Expenses:
Rent Expense	7,500
Salaries Expense ($33,000 + $500)	33,500
Advertising Expense	5,100
Delivery Expense	7,400
Office Supplies Expense ($4,100-$2,900)	1,200
Insurance Expense ($2,400-$1,600)	800
Depreciation Expense($22,500-$14,500)	8,000
Total Operating Expenses		63,500
Net Income		19,500
Proof;
Retained Earnings
December 31        $49,500
January 1               30,000
Increase               $19,500