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Chapter 5: Q31RQ (page 295)
Describe the calculation of cost of goods sold when using the periodic inventory system.
Answer
The cost of goods sold is computed by considering theopening inventory, net purchases, and closing inventory.
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Describe the journal entry(ies) when recording a sale of inventory using the periodic inventory system.
Rocky RV Center’s accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold \( 372,000 Accumulated Depreciation—Building \) 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense—Building 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
What is freight out and how is it recorded by the seller?
Journalize the following transactions for Master Bicycles using the periodic inventory system. Explanations are not required.
Nov. 2 Purchased \(3,400 of merchandise inventory under terms 2/10, n/EOM, and FOB shipping point.
6 Returned \)800 of defective merchandise purchased on November 2.
8 Paid freight bill of \(100 on November 2 purchase.
10 Sold merchandise inventory on account for \)6,100. Payment terms were 3/15, n/45.
11 Paid amount owed on credit purchase of November 2, less the return and the discount.
22 Received cash from November 10 customer in full settlement of their debt, less the discount.
The records of Farm Quality Steak Company list the following selected accounts for the quarter ended April 30, 2018:
Interest Revenue \( 400 Accounts Payable \) 17,700
Merchandise Inventory 45,000 Accounts Receivable 38,200
Notes Payable, long-term 54,000 Accumulated Depreciation—Equipment 37,700
Salaries Payable 2,800 Common Stock 30,000
Net Sales Revenue 298,000 Retained Earnings 5,380
Rent Expense (Selling) 15,100 Dividends 25,000
Salaries Expense (Administrative) 2,000 Cash 7,100
Office Supplies 6,500 Cost of Goods Sold 154,960
Unearned Revenue 13,100 Equipment 132,000
Interest Expense 2,100 Interest Payable 1,700
Depreciation Expense—Equipment (Administrative) 1,320
Rent Expense (Administrative) 7,100
Utilities Expense (Administrative) 4,600 Salaries Expense (Selling) 6,000
Delivery Expense (Selling) 3,800 Utilities Expense (Selling) 10,000
Requirements
1. Prepare a single-step income statement.
2. Prepare a multi-step income statement.
3. M. Doherty, manager of the company, strives to earn a gross profit percentage of at least 50%. Did Farm Quality achieve this goal? Show your calculations
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