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Chapter 5: Q29E (page 303)

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.

Short Answer

Expert verified

The total of debits and credits is$22,080.

Step by step solution

01

Meaning of Raw Materials 

In cost accounting, raw material denotes the goods required to be processed before selling them to the consumers. Raw materials pass through the production process and appear asfinished goods.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Sep 4

Purchases

6,900

Accounts payable

6,900

Sept 4

Freight in

480

Cash

480

Sep 10

Accounts payable

300

Purchase returns

300

Sep 17

Accounts payable (6900-300)

6,600

Purchase discount (6600*3%)

198

Cash

6402

Sep 20

Purchases

3,900

Accounts payable

3,900

Sep 22

Accounts payable

400

Purchase allowance

400

Sep 29

Accounts payable (3900-400)

3,500

Purchase discount (3500*1%)

35

Cash

3,465

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Most popular questions from this chapter

Rae Philippe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, auditors would come to do a physical count of the inventory at each warehouse. Recently, Rae’s brother started his own drilling company and persuaded Rae to “loan” him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. “Send me over 80 joints of 5-inch pipe tomorrow, and I’ll get them back to you ASAP,” said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a “no-exception” report.

Requirements

1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice?

2. How would this kind of action affect the financial performance of the company?

The unadjusted trial balance for Trudel Electronics Company at March 31, 2018, follows:

TRUDEL ELECTRONICS COMPANY

Unadjusted Trial Balance

March 31, 2018

Balance

Account Title Debit Credit

Cash \(4,000

Accounts Receivable 38,800

Merchandise Inventory 45,500

Office Supplies 6,500

Equipment 130,000

Accumulated Depreciation-Equipment \)36,800

Accounts Payable 17,400

Unearned revenue 13,200

Notes Payable, long-term 48,000

Common Stock 60,000

Retained Earnings 100

Dividends 20,000

Sales Revenue 282,500

Cost of Goods Sold 160,600

Salaries Expense (Selling) 20,000

Rent Expense (Selling) 15,800

Salaries Expenses (Administrative) 5,700

Utilities Expenses (Administrative) 11,100

Total \(458,000 \)458,000

Requirements

1. Journalize the adjusting entries using the following data:

a. Interest revenue accrued, \(200.

b. Salaries (Selling) accrued, \)2,300.

c. Depreciation Expense—Equipment (Administrative), \(1,300.

d. Interest expense accrued, \)1,500.

e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of \(45,200.

f. Trudel estimates that approximately \)6,000 of merchandise sold will be returned with a cost of $1,200.

2. Prepare Trudel Electronics’s adjusted trial balance as of March 31, 2018.

3. Prepare Trudel Electronics’s multi-step income statement for year ended March 31, 2018.

Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.

26 Received payment from customer on balance due.

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

Match the accounting terms with the corresponding definitions.

1. Credit Terms a. The cost of the merchandise inventory that the business has sold to customers.

2. FOB Destination b. An amount granted to the purchaser as an incentive to keep goods that are not “as ordered.”

3. Invoice c. A type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers.

4. Cost of Goods Sold d. A situation in which the buyer takes ownership (title) at the delivery destination point.

5. Purchase Allowance e. A type of merchandiser that buys goods from manufacturers and then sells them to retailers.

6. FOB Shipping Point f. A discount that businesses offer to purchasers as an incentive for early payment.

7. Wholesaler g. A situation in which the buyer takes title to the goods after the goods leave the seller’s place of business.

8. Purchase Discount h. The terms of purchase or sale as stated on the invoice.

9. Retailer i. A seller’s request for cash from the purchaser.

On December 31, Jack Photography Supplies estimated that approximately 2% of merchandise sold will be returned. Sales Revenue for the year was \(80,000 with a cost of \)48,000. Journalize the adjusting entries needed to account for the estimated returns.
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