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Chapter 5: Q5-25RQ (page 294)
What account is debited when recording a purchase of inventory when using a periodic inventory system?
The purchase account is debited when recording a purchase of inventory while using aperiodic inventory system.
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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.
Highlight the differences in the closing process when using the periodic inventory system rather than the perpetual inventory system.
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
Question: 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
Prepare the multi-step income statement for the year ended December 31, 2018.
Describe the single-step income statement.
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