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Chapter 5: Q5-27RQ (page 295)
What account is debited when recording the payment of freight when using the periodic inventory system?
Freight-in account is debited when recording freight payments while using the periodicinventory system.
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Suppose Muddyriver.com sells 2,000 books on account for \(19 each (cost of these books is \)22,800), credit terms 1/20, n/45 on October 10, to The Salem Store. The Salem Store paid the balance to Muddyriver.com on October 22.
Requirements
1. Journalize the Salem Store’s October transactions.
2. Journalize Muddyriver.com’s October transactions. Assume Muddyriver.com uses the gross method to record sales revenue.
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.
Ocean Life Boat Supply uses the periodic inventory method. The adjusted trial balance of Ocean Life Boat Supply at December 31, 2018, follows:
Requirements
1. Journalize the required closing entries at December 31, 2018. Assume ending Merchandise Inventory is $54,300.
2. Set up T-accounts for Income Summary; Retained Earnings; and Dividends. Post the closing entries to the T-accounts, and calculate their ending balances.
3. How much was Ocean Life’s net income or net loss?
Journalize the following transactions for Soul Art Gift Shop. Explanations are not required.
Feb. 3 Purchased \(3,300 of merchandise inventory under terms 3/10, n/EOM, and FOB shipping point.
7 Returned \)900 of defective merchandise purchased on February 3.
9 Paid freight bill of \(400 on February 3 purchase.
10 Sold merchandise inventory on account for \)4,700. Payment terms were 2/15, n/30. These goods cost the company $2,350.
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.
Match the accounting terminology to the definitions.
1. Cost of Goods Sold | a. An inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand. |
2. Perpetual inventory system | b. Expenses, other than the Cost of Goods Sold, that are incurred in the entity’s major ongoing operations. |
3. Vendor | c. Excess of Net Sales Revenue over Cost of Goods Sold. |
4. Periodic inventory system | d. The cost of merchandise inventory that the business has sold to customers. |
5. Operating expenses | e. The individual or business from whom a company purchases goods. |
6. Gross profit | f. An inventory system that keeps a running computerized record of merchandise inventory. |
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