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Chapter 5: Q5-13RQ (page 294)
What are the two journal entries involved when recording the sale of inventory when using the perpetual inventory system?
In the perpetual inventory system, two primary journal entries include the following:
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Journalize the following sales transactions for Morris Supply. Explanations are not required.
Mar. 1 Morris Supply sold merchandise inventory for \(3,000. The cost of the inventory was \)1,800. The customer paid cash. Morris Supply was running a promotion, and the customer received a \(150 award at the time of sale that can be used at a future date on any Morris Supply merchandise.
3 Sold \)6,000 of supplies on account. Credit terms are 2/10, n/45, FOB destination. The cost of goods is \(3,600.
10 Received payment from the customer on the amount due from March 3, less the discount.
Apr. 15 The customer used the \)150 award when purchasing merchandise inventory for \(200; the inventory cost was \)120. The customer paid cash.
What is freight out and how is it recorded by the seller?
The records of Grade A Beef Company list the following selected accounts for the quarter ended September 30, 2018:
Interest Revenue \( 900 Accounts Payable \) 17,000
Merchandise Inventory 46,300 Accounts Receivable 33,500
Notes Payable, long-term 47,000 Accumulated Depreciation— Equipment 36,500
Salaries Payable 2,600 Common Stock 38,000
Net Sales Revenue 294,000 Retained Earnings 3,610
Rent Expense (Selling) 16,700 Dividends 15,000
Salaries Expense (Administrative) 2,500 Cash 7,300
Office Supplies 5,800 Cost of Goods Sold 161,700
Unearned Revenue 13,800 Equipment 131,000
Interest Expense 2,300 Interest Payable 900
Depreciation Expense—Equipment (Administrative) 1,310
Rent Expense (Administrative) 7,400
Utilities Expense (Administrative) 4,500 Salaries Expense (Selling) 5,000
Delivery Expense (Selling) 3,100 Utilities Expense (Selling) 10,900
Requirements
1. Prepare a single-step income statement.
2. Prepare a multi-step income statement.
3. J. Douglas, manager of the company, strives to earn a gross profit percentage of at least 50%. Did Grade A Beef achieve this goal? Show your calculations
Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.
Requirements
1. Journalize the adjustment for inventory shrinkage.
2. Journalize the adjustment for estimated sales returns.
Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:
Selling Expenses $ 10,500
Interest Revenue 1,000
Net Sales Revenue 113,500
Cost of Goods Sold 85,000
Administrative Expenses 8,000
Determine the gross profit percentage for the year ended December 31, 2018.
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