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Chapter 5: 19E (page 300)

Kingston Tires received the following invoice from a supplier (Fields Distribution, Inc.):

Requirements

1. Journalize the transaction required by Kingston Tires on September 23, 2018. Do not round numbers to the nearest whole dollar. Assume tires are purchased on account.

2. Journalize the return on Kingston’s books on September 28, 2018, of the D39–X4 Radials, which were ordered by mistake. Do not round numbers to the nearest whole dollar.

3. Journalize the payment on October 1, 2018, to Fields Distribution, Inc. Do not round numbers to the nearest whole dollar.

Short Answer

Expert verified

The total amount paid by Kingston Tires is$769.34.

Step by step solution

01

Meaning of Invoice

An invoice refers to a commercial document prepared by the seller of goods or services. It reminds the buyer to pay the outstanding amount against the purchases made. This document contains essential details associated with thepayment term, price of goods, quantity, and many more.

02

Journalizing the transaction required by Kingston Tires

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Sept 23

Merchandise Inventory

929.60

Accounts payable

929.60

(To record the purchase of inventory)

03

Step 3:Journalizing the return on Kingston’s books

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Sept 28

Accounts payable

152.48

Merchandise inventory

152.48

(To record the return of inventory)

04

Journalizing the payment transaction

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Oct 1

Accounts payable (929.60-152.48)

777.12

Cash (777.12-1%*777.12)

769.34

Merchandise inventory

7.77

(To record the payment)

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Most popular questions from this chapter

Click Computers has the following transactions related to the sale of merchandise inventory.

Mar. 1 Sold a computer (cost of \(3,000) for \)8,000 to a customer. The customer paid cash. The sales price included a one-year service contract valued at $168.

Dec. 31 Recorded the amount of service contract earned.

Journalize the transactions for Click Computers assuming that the company uses the perpetual inventory system.

Journalize the following transactions that occurred in September 2018 for Aquamarines. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Aquamarines estimates sales returns at the end of each month.

Sep. 3 Purchased merchandise inventory on account from Sharpner Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)85 on September 3 purchase.

4 Purchased merchandise inventory for cash of \(1,600.

6 Returned \)1,300 of inventory from the September 3 purchase.

8 Sold merchandise inventory to Herman Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,565.

9 Purchased merchandise inventory on account from Tucker Wholesalers, \(6,000. Terms 3/10, n/30, FOB destination.

10 Made payment to Sharpner Wholesalers for goods purchased on September 3, less return and discount.

12 Received payment from Herman Company, less discount.

13 After negotiations, I received a \)500 allowance from Tucker Wholesalers.

15 Sold merchandise inventory to Jerome Company, \(2,800, on account. Terms n/EOM. Cost of goods, \)1,200.

22 Made payment, less allowance, to Tucker Wholesalers for goods purchased on September 9.

23 Jerome Company returned \(200 of the merchandise sold on September 15. Cost of goods, \)80.

25 Sold merchandise inventory to Small for \(1,800 on account that cost \)738. Terms of 3/10, n/30 was offered, FOB shipping point. As a courtesy to Small, $40 of freight was added to the invoice, for which Aquamarines paid cash.

29 Received payment from Small, less discount.

30 Received payment from Jerome Company, less return.

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.

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

Party-Time T-Shirts sells T-shirts for parties at the local college. The company completed the first year of operations, and the shareholders are generally pleased with operating results as shown by the following income statement:

PARTY-TIME T-SHIRTS

Income Statement

Year Ended December 31, 2017

Net Sales Revenue \(350,000

Cost of Goods Sold 210,000

Gross Profit 140,000

Operating Expenses:

Selling Expense 40,000

Administrative Expense 25,000

Net Income \)75,000

Bill Hildebrand, the controller, is considering how to expand the business. He proposes two ways to increase profits to \(100,000 during 2018.

a. Hildebrand believes he should advertise more heavily. He believes additional advertising costing \)20,000 will increase net sales by 30% and leave administrative expense unchanged. Assume that Cost of Goods Sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, Cost of Goods Sold will increase proportionately.

b. Hildebrand proposes selling higher-margin merchandise, such as party dresses, in addition to the existing product line. An importer can supply a minimum of 1,000 dresses for \(40 each; Party-Time can mark these dresses up 100% and sell them for \)80. Hildebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. Party-Time can expect to sell only 80% of these dresses during the coming year.

Help Hildebrand determine which plan to pursue. Prepare a multi-step income statement for 2018 to show the expected net income under each plan.
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