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Chapter 5: Q5-3RQ (page 294)
Describe the operating cycle of a merchandiser.
The term operating cycle of a merchandiser refers to the process which includes the purchase of inventory, sale of the same, and collection of cash.
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Suppose Piranha.com sells 3,500 books on account for \(17 each (cost of these books is \)35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Store as sales returns on October 13, 2018.
Requirements
1. Journalize The Textbook Store’s October 2018 transactions.
2. Journalize Piranha.com’s October 2018 transactions. The company estimates sales returns at the end of each month.
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.
The unadjusted trial balance for Trudel Electronics Company at March 31, 2018, follows:
TRUDEL ELECTRONICS COMPANY
Unadjusted Trial Balance
March 31, 2018
Balance
Account Title Debit Credit
Cash \(4,000
Accounts Receivable 38,800
Merchandise Inventory 45,500
Office Supplies 6,500
Equipment 130,000
Accumulated Depreciation-Equipment \)36,800
Accounts Payable 17,400
Unearned revenue 13,200
Notes Payable, long-term 48,000
Common Stock 60,000
Retained Earnings 100
Dividends 20,000
Sales Revenue 282,500
Cost of Goods Sold 160,600
Salaries Expense (Selling) 20,000
Rent Expense (Selling) 15,800
Salaries Expenses (Administrative) 5,700
Utilities Expenses (Administrative) 11,100
Total \(458,000 \)458,000
Requirements
1. Journalize the adjusting entries using the following data:
a. Interest revenue accrued, \(200.
b. Salaries (Selling) accrued, \)2,300.
c. Depreciation Expense—Equipment (Administrative), \(1,300.
d. Interest expense accrued, \)1,500.
e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of \(45,200.
f. Trudel estimates that approximately \)6,000 of merchandise sold will be returned with a cost of $1,200.
2. Prepare Trudel Electronics’s adjusted trial balance as of March 31, 2018.
3. Prepare Trudel Electronics’s multi-step income statement for year ended March 31, 2018.
The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:
ROCKIN ROBBIN DANCE COMPANY
Adjusted Trial Balance
April 30, 2018
Balance
Account Title Debit Credit
Cash \(4,400
Accounts Receivable 38,000
Merchandise Inventory 17,800
Office Supplies 850
Furniture 39,900
Accumulated Depreciation-Furniture \)8,300
Accounts Payable 14,100
Salaries Payable 1,000
Unearned Revenue 6,500
Notes Payable, long-term 12,000
Common Stock 5,000
Retained Earnings 36,150
Dividends 40,000
Sales Revenue 178,500
Cost of Goods Sold 83,700
Selling Expense 19,000
Administrative Expense 16,000
Interest Expense 1,900
Total \(261,550 \)261,550
Requirements
1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018.
2. Journalize Rockin Robbin’s closing entries.
3. Prepare a post-closing trial balance as of April 30, 2018.
Journalize the following transactions that occurred in March 2018 for Double Company. Assume Double uses the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Double estimates sales returns at the end of each month.
Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.
4 Paid freight bill of \)70 on March 3 purchase.
4 Purchased merchandise inventory for cash of \(1,100.
6 Returned \)900 of inventory from March 3 purchase.
8 Sold merchandise inventory to Herrick Company, \(3,400, on account. Terms 1/15, n/35.
9 Purchased merchandise inventory on account from Tex Wholesalers, \)5,600. Terms 2/10, n/30, FOB destination.
10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount.
12 Received payment from Herrick Company, less discount.
13 After negotiations, received a \(500 allowance from Tex Wholesalers.
15 Sold merchandise inventory to Jesper Company, \)1,700, on account. Terms n/EOM.
22 Made payment, less allowance, to Tex Wholesalers for goods purchased on March 9.
23 Jesper Company returned \(300 of the merchandise sold on March 15.
25 Sold merchandise inventory to Salter for \)1,000 on account. Terms of 1/10, n/30 was offered, FOB shipping point.
29 Received payment from Salter, less discount.
30 Received payment from Jesper Company, less return.
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