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Chapter 5: Q5-16RQ (page 294)
When granting a sales allowance is there a return of merchandise inventory from the customer? Describe the journal entry(ies) that would be recorded.
When a business entity grants sales allowance to its customers, it does not receive the merchandise back in such a situation.
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On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, \(12,000, that cost \)4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.
Requirements
1. Journalize Tarin Wholesaler’s November transactions.
2. Journalize Cain Company’s November transactions.
Describe the single-step income statement.
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.
Comparing periodic and perpetual inventory systems
For each statement below, identify whether the statement applies to the periodic inventory system, the perpetual inventory system, or both.
a. Normally used for relatively inexpensive goods.
b. Keeps a running computerized record of merchandise inventory.
c. Achieves better control over merchandise inventory.
d. Requires a physical count of inventory to determine the quantities on hand.
e. Uses bar codes to keep up-to-the-minute records of inventory.
Journalize the following transactions that occurred in January 2018 for Sylvia’s Amusements. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sylvia estimates sales returns at the end of each month.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(7,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)100 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, \(1,600. Cost of goods, \)640. FOB destination.
11 Sold merchandise inventory to Graceland Corporation, \(10,800, on account, terms of 1/10, n/EOM. Cost of goods, \)5,400. FOB shipping point.
12 Paid freight bill of \(60 on January 10 sale.
13 Sold merchandise inventory to Cabbell Company, \)9,500, on account, terms of n/45. Cost of goods, \(5,225. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
17 Received defective inventory as a sales return from the January 13 sale, \)600. Cost of goods, \(300.
18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 3/10, n/30, FOB destination.
20 Received cash from Graceland Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cabbell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, \(11,600, FOB shipping point. Freight in paid to shipping company, \)240.
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