Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q2SE (page 295)

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?

Short Answer

Expert verified

Answer

The cost of inventory is$100,009.

Step by step solution

01

Meaning of Purchases

In accounting, the term purchases denote the acquisition of goods to resell them to generate revenues. The acquisition of goods is either done on cash or credit and recorded differently underperiodic and perpetual inventory systems.

02

Journal entries for purchase transactions

Date

Accounts and Explanation

Debit ($)

Credit ($)

May 8

Merchandise inventory

113,300

Accounts payable

113,300

May 12

Accounts payable

11,250

Merchandise inventory

11,250

May 15

Accounts payable (113,300-11,250)

102,050

Cash (102,050-2041)

100,009

Merchandise inventory (102,050*2%)

2,041

03

Computation of inventory cost  

Inventorycost=Valueofinventory-Returns-Discount=$113,300-$11,250-$2,041=$100,009

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Describe the journal entry(ies) when recording a sale of inventory using the periodic inventory system.

Journalize the following sales transactions for Straight Shot Archery using the periodic inventory system. Explanations are not required. The company estimates sales returns and allowances at the end of each month.

Aug. 1 Sold \(6,500 of equipment on the account; credit terms are 1/10, n/30.

8 Straight Shot received payment from the customer on the amount due from August 1, less the discount.

15 Sold \)3,100 of equipment on the account; credit terms are n/45, FOB destination.

15 Straight Shot paid \(90 on freight out.

20 Straight Shot negotiated a \)500 allowance on the goods sold on August 15.

24 Received payment from the customer on the amount due from August 15, less the allowance.

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.

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.

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:
See all solutions

Recommended explanations on Business Studies Textbooks

Introduction to Business

Read Explanation

Organizational Behavior

Read Explanation

Nature of Business

Read Explanation

Intermediate Accounting

Read Explanation

Human Resources

Read Explanation

Strategic Analysis

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free