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Chapter 5: Q5-14RQ (page 294)
Under the new revenue recognition standard, how is the sale of inventory recorded?
The sale of inventory is recorded at the net price under the newrevenue recognition standard.
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The unadjusted trial balance for Tuttle Electronics Company follows:
TUTTLE ELECTRONICS COMPANY
Unadjusted Trial Balance
October 31, 2018
Balance
Account Title Debit Credit
Cash \(4,200
Accounts Receivable 33,800
Merchandise Inventory 45,700
Office Supplies 5,700
Equipment 129,500
Accumulated Depreciation-Equipment \)37,200
Accounts Payable 15,600
Unearned Revenue 13,400
Notes Payable, long-term 53,000
Common Stock 48,000
Retained Earnings 6,700
Dividends 27,000
Sales Revenue 300,300
Cost of Goods Sold 171,600
Salaries Expense (Selling) 26,000
Rent Expense (Selling) 15,400
Salaries Expense (Administrative) 4,800
Utilities Expense (Administrative) 10,500
Total \(474,200 \)474,200
Requirements
1. Journalize the adjusting entries using the following data:
a. Interest revenue accrued, \(550.
b. Salaries (Selling) accrued, \)2,800.
c. Depreciation Expense—Equipment (Administrative), \(1,295.
d. Interest expense accrued, \)1,500.
e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of \(45,300.
f. Tuttle estimates that approximately \)6,200 of merchandise sold will be returned with a cost of $2,480.
2. Prepare Tuttle Electronics’s adjusted trial balance as of October 31, 2018.
3. Prepare Tuttle Electronics’s multi-step income statement for year ended October 31, 2018.
Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.
Jan. 4 Sold \(16,000 of antiques on the account; credit terms are n/30. The cost of goods is \)8,000.
8 Received a \(300 sales return on damaged goods from the customer. The cost of goods damaged is \)150.
13 Antique Mall received payment from the customer on the amount due from Jan. 4, less the return.
20 Sold \(4,900 of antiques on the account; credit terms are 1/10, n/45, FOB destination. The cost of goods is \)2,450.
20 Antique Mall paid $70 on freight out.
29 Received payment from the customer on the amount due from Jan. 20, less the discount.
Jeana’s Furniture’s unadjusted Merchandise Inventory account at year-end is \(69,000. The physical count of inventory came up with a total of \)67,600. Journalize the adjusting entry needed to account for inventory shrinkage.
Journalize the following sales transactions for Salem Sportswear. Explanations are not required. The company estimates sales returns at the end of each month.
Jul. 1 Salem sold \(20,000 of men’s sportswear for cash. Cost of goods sold is \)10,000.
3 Salem sold \(62,000 of women’s sportswear on account, credit terms are 3/10, n/30. Cost of goods is \)31,000.
5 Salem received a \(4,500 sales return on damaged goods from the customer on July 1. Cost of goods damaged is \)2,250.
10 Salem receives payment from the customer on the amount due, less discount.
What account is debited when recording a purchase of inventory when using a periodic inventory system?
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