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Chapter 5: Q5-2RQ (page 294)
What are the two types of merchandisers? How do they differ?
The merchandisers are generally classified into categories: Wholesalers and retailers.
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Rocky RV Center’s accounting records include the following accounts at December 31, 2018.
Cost of Goods Sold \( 372,000 Accumulated Depreciation—Building \) 38,000
Accounts Payable 16,000 Cash 47,000
Rent Expense 26,000 Sales Revenue 636,500
Building 113,000 Depreciation Expense—Building 13,000
Common Stock 115,000 Dividends 58,000
Retained Earnings 83,100 Interest Revenue 14,000
Merchandise Inventory 239,600
Notes Receivable 34,000
Requirements
1. Journalize the required closing entries for Rocky.
2. Determine the ending balance in the Retained Earnings account.
The adjusted trial balance of Rachael Rey Music Company at June 30, 2018, follows:
RACHAEL REY MUSIC COMPANY
Adjusted Trial Balance
June 30, 2018
Balance
Account Title Debit Credit
Cash \(4,000
Accounts Receivable 38,400
Merchandise Inventory 18,100
Office Supplies 300
Furniture 39,900
Accumulated Depreciation-Furniture \)8,200
Accounts Payable 13,800
Salaries Payable 850
Unearned Revenue 7,500
Notes Payable, long-term 17,000
Common Stock 6,000
Retained Earnings 21,350
Dividends 40,000
Sales Revenue 184,000
Cost of Goods Sold 85,500
Selling Expense 18,600
Administrative Expense 12,000
Interest Expense 1,900
Total \(258,700 \)258,700
Requirements
1. Prepare Rachael Rey’s multi-step income statement for the year ended June 30, 2018.
2. Journalize Rachael Rey’s closing entries.
3. Prepare a post-closing trial balance as of June 30, 2018.
What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for inventory shrinkage.
Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.
Requirements
1. Journalize the adjustment for inventory shrinkage.
2. Journalize the adjustment for estimated sales returns.
Journalize the following transactions that occurred in February 2018 for Oceanic. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Oceanic estimates sales returns at the end of each month.
Feb. 3 Purchased merchandise inventory on account from Silton Wholesalers, \(5,200. Terms 2/15, n/EOM, FOB shipping point.
4 Paid freight bill of \)70 on February 3 purchase.
4 Purchased merchandise inventory for cash of \(1,500.
6 Returned \)900 of inventory from February 3 purchase.
8 Sold merchandise inventory to Herenda Company, \(5,600, on account. Terms 3/15, n/35. Cost of goods, \)2,352.
9 Purchased merchandise inventory on account from Teddy Wholesalers, \(7,000. Terms 1/10, n/30, FOB destination.
10 Made payment to Silton Wholesalers for goods purchased on February 3, less return and discount.
12 Received payment from Herenda Company, less discount.
13 After negotiations, received a \)500 allowance from Teddy Wholesalers.
15 Sold merchandise inventory to Jordon Company, \(3,400, on account. Terms n/EOM. Cost of goods, \)1,496.
22 Made payment, less allowance, to Teddy Wholesalers for goods purchased on February 9.
23 Jordon Company returned \(1,000 of the merchandise sold on February 15. Cost of goods, \)440.
25 Sold merchandise inventory to Smith for \(1,700 on account that cost \)663. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Smith, $70 of freight was added to the invoice for which cash was paid by Oceanic.
27 Received payment from Smith, less discount.
28 Received payment from Jordon Company, less return.
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