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Chapter 5: Q5-21RQ (page 294)
Describe the multi-step income statement.
A multi-step income statement presents the operating and non-operating revenues and expenses separately to reflect thenet income of a business.
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Journalize the following transactions that occurred in March 2018 for Faucet. Assume Faucet uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(3,500. Terms 2/15, n/EOM, FOB shipping point.
4 Paid freight bill of \)75 on March 3 purchase.
4 Purchased merchandise inventory for cash of \(2,200.
6 Returned \)800 of inventory from March 3 purchase.
8 Sold merchandise inventory to Harvey Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,508.
9 Purchased merchandise inventory on account from Teaton Wholesalers, \(6,000. Terms 2/10, n/30, FOB destination.
10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount.
13 After negotiations, received a \)100 allowance from Teaton Wholesalers.
15 Sold merchandise inventory to Jackson Company, \(2,900, on account. Terms n/EOM. Cost of goods, \)1,276.
22 Made payment, less allowance, to Teaton Wholesalers for goods purchased on March 9.
25 Sold merchandise inventory to Secker for \(2,000 on account that cost \)880. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Secker, $85 of freight was added to the invoice for which cash was paid by Faucet.
28 Received payment from Harvey Company.
29 Received payment from Secker, less discount.
30 Received payment from Jackson Company.
Journalize the following transactions for Santa Fe Art Gift Shop. Assume Santa Fe uses the gross method to record sales revenue. Explanations are not required.
Feb. 3 Purchased \(2,800 of merchandise inventory on account under terms 3/10, n/EOM and FOB shipping point.
7 Returned \)700 of defective merchandise purchased on February 3.
9 Paid freight bill of \(400 on February 3 purchase.
10 Sold merchandise inventory on account for \)4,800. Payment terms were 1/15, n/30. These goods cost the company $2,400.
12 Paid amount owed on credit purchase of February 3, less the return and the discount.
28 Received cash from February 10 customer in full settlement of their debt.
When a company has a contract involving multiple performance obligations, how must the company recognize revenue?
Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.
July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.
3 Return of \)4,000 of the computers to the vendor.
9 Payment made on the account.
12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.
26 Received payment from customer on balance due.
Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.
Click Computers has the following transactions related to the sale of merchandise inventory.
Mar. 1 Sold a computer (cost of \(3,000) for \)8,000 to a customer. The customer paid cash. The sales price included a one-year service contract valued at $168.
Dec. 31 Recorded the amount of service contract earned.
Journalize the transactions for Click Computers assuming that the company uses the perpetual inventory system.
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