EXERCISES: SET B AND CHALLENGE EXERCISES

26 Aug EXERCISES: SET B AND CHALLENGE EXERCISES

EXERCISES: SET B AND CHALLENGE EXERCISES

Visit the book’s companion website, at www.wiley.com/college/weygandt, and choose the Student Companion site to access Exercises: Set B and Challenge Exercises.

Problems: Set A 251

PROBLEMS: SET A

P5-1A Kern’s Book Warehouse distributes hardcover books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. At the end of May, Kern’s inventory con- sisted of books purchased for $1,800. During June, the following merchandising transac- tions occurred.

Journalize purchase and sales transactions under a perpetual inventory system.

(LO 2, 3)

June 1

3

6

9 15 17

20

24 26 28

30

Purchased books on account for $1,600 from Binsfeld Publishers, FOB destination, terms 2/10, n/30. The appropriate party also made a cash payment of $50 for the freight on this date.

Sold books on account to Reading Rainbow for $2,500. The cost of the books sold was $1,440.

Received $100 credit for books returned to Binsfeld Publishers.

Paid Binsfeld Publishers in full, less discount.

Received payment in full from Reading Rainbow.

Sold books on account to Rapp Books for $1,800. The cost of the books sold was $1,080.

Purchased books on account for $1,800 from McGinn Publishers, FOB destination, terms 2/15, n/30. The appropriate party also made a cash payment of $60 for the freight on this date.

Received payment in full from Rapp Books.

Paid McGinn Publishers in full, less discount.

Sold books on account to Baeten Bookstore for $1,600. The cost of the books sold was $970.

Granted Baeten Bookstore $120 credit for books returned costing $72.

Kern’s Book Warehouse’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 201 Accounts Payable, No. 401 Sales Reve- nue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Instructions

Journalize the transactions for the month of June for Kern’s Book Warehouse using a per- petual inventory system.

P5-2A Renner Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Renner showed Cash of $5,000 and Owner’s Capital of $5,000.

Journalize, post, and prepare a partial income statement.

(LO 2, 3, 5)

May 1 2 5 9

10 11 12 15

17

19 24 25

Purchased merchandise on account from Braun’s Wholesale Supply $4,200, terms 2/10, n/30.

Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the merchandise sold was $1,300.

Received credit from Braun’s Wholesale Supply for merchandise returned $300.

Received collections in full, less discounts, from customers billed on sales of $2,100 on May 2.

Paid Braun’s Wholesale Supply in full, less discount.

Purchased supplies for cash $400.

Purchased merchandise for cash $1,400.

Received refund for poor quality merchandise from supplier on cash purchase $150.

Purchased merchandise from Valley Distributors $1,300, FOB shipping point, terms 2/10, n/30.

Paid freight on May 17 purchase $130.

Sold merchandise for cash $3,200. The merchandise sold had a cost of $2,000. Purchased merchandise from Lumley, Inc. $620, FOB destination, terms 2/10, n/30.

252 5 Accounting for Merchandising Operations

27 Paid Valley Distributors in full, less discount.

29 Made refunds to cash customers for defective merchandise $70. The returned

merchandise had a fair value of $30.

31 Sold merchandise on account $1,000 terms n/30. The cost of the merchandise

sold was $560.

Renner Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Instructions

(a) Journalize the transactions using a perpetual inventory system.

(b) Enter the beginning cash and capital balances and post the transactions. (Use J1 for

the journal reference.)

(c) Prepare an income statement through gross profit for the month of May 2017.

P5-3A Big Box Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the com- pany’s fiscal year on November 30, 2017, the following accounts appeared in two of its trial balances.

(c) Gross profit $2,379

Prepare financial statements and adjusting and closing entries.

(LO 4, 5)

Accounts Payable

Accounts Receivable

Accumulated Depr.—Equip.

Cash 26,00026,000PrepaidInsurance 10,5003,500 Cost of Goods Sold 518,000 518,000 Property Tax Expense 2,500 Freight-Out 6,500 6,500 Property Taxes Payable 2,500 Equipment 146,000146,000RentExpense 15,00015,000

Unadjusted

Adjusted

Unadjusted

Adjusted

Depreciation Expense Insurance Expense Interest Expense Interest Revenue Inventory

(a) Net income $32,100 Owner’s capital $123,800 Total assets $193,000

Journalize, post, and prepare a trial balance.

(LO 2, 3, 4)

6,400

2,000 32,000

Instructions

11,000 7,000 6,400 2,000

32,000

Salaries and Wages Expense Sales Revenue

Sales Commissions Expense Sales Commissions Payable Sales Returns and Allowances Utilities Expense

96,000 720,000 6,500

8,000 8,500

96,000 720,000 11,000 4,500 8,000 8,500

$ 25,200 30,500 34,000

$ 25,200 30,500 45,000

Notes Payable Owner’s Capital Owner’s Drawings

$ 37,000 101,700 10,000

$ 37,000 101,700 10,000

(a) Prepare a multiple-step

fied balance sheet. Notes payable are due in 2020.