Exercise 5-9

Note: The original missing numbers are blocked.

Sales ............................

(a)

(b)

(c)

(d)

(e)

$60,000

$42,500

$36,000

$78,000

$23,600

Cost of goods sold:

Merch. inv. (beg.) .......
Total cost of merch.
purchases .................

6,000

17,050

7,500

7,000

2,560

36,000

1,550

33,750

32,000

5,600

Merch. inv. (end.) .......

(7,950)

(2,700)

(9,000)

(6,600)

Cost of goods sold ....

34,050

15,900

32,250

32,400

5,600

Gross profit .................

25,950

26,600

3,750

45,600

18,000

Expenses .....................

9,000

10,650

12,150

2,600

6,000

Net income (loss) ........

$16,950

$15,950

$ (8,400)

$43,000

$12,000

(2,560)

Explanations:
a. Find merchandise inventory (ending) by subtracting cost of goods sold from
goods available for sale. Find gross profit as the difference between the sales
and cost of goods sold. Find net income as the gross profit less the expenses.
b. Find total cost of merchandise purchases by finding the number that makes the
total equal the cost of goods sold. Find gross profit from sales less cost of
goods sold.
c. Find cost of goods sold from sales less gross profit. Find cost of merchandise
purchases by finding the number to make the calculation equal cost of goods
sold.
d. Calculate cost of goods sold as usual. Calculate sales as gross profit plus cost
of goods sold.
e. Find merchandise inventory (ending) by subtracting cost of goods sold from
goods available for sale. Find gross profit from sales less cost of goods sold.
Find net income as gross profit less expenses.

Exercise 5-14
Perpetual Inventory System
1)
Nov. 1

Merchandise Inventory .................................... 1,400

Accounts Payable .....................................

1,400

To record merchandise purchases on credit.

2)
Nov. 5 Accounts Payable ............................................ 1,400
Merchandise Inventory .............................
Cash ...........................................................

28
1,372

To record cash payment in discount period.

*$1,400 x 0.02
3)
Nov. 7 Cash ...................................................................
Merchandise Inventory .............................

98
98

To record check received for return of purchases

previously paid for with discount already taken.

*$100 ($100 x 0.02)

4)
Nov. 10 Merchandise Inventory ....................................
Cash ...........................................................

80
80

To record payment of freight charges.

5)
Nov. 13 Accounts Receivable ....................................... 1,500
Sales...........................................................

1,500

To record sale of merchandise on credit.

Nov. 13 Cost of Goods Sold .........................................

Merchandise Inventory .............................

750
750

To record cost of merchandise sold.

6)
Nov. 16 Sales Returns and Allowances .......................
Accounts Receivable ................................

200
200

To record return of merchandise sold on credit.

Nov. 16 Merchandise Inventory ....................................

Cost of Goods Sold ..................................
To record cost of merchandise returned.

100
100

Problem 5-2A
July 1

Merchandise Inventory ..................................... 6,000

Accounts PayableBlack .........................

6,000

Purchased goods on credit.

Accounts ReceivableCoke ............................

Sales............................................................

800
800

Sold goods on credit.

Cost of Goods Sold ...........................................

Merchandise Inventory ..............................

500
500

To record cost of the July 2 sale.

Merchandise Inventory .....................................

Cash ............................................................

100
100

Paid freight on incoming goods.

Cash .................................................................... 1,600

Sales............................................................

1,600

Sold goods for cash.

Cost of Goods Sold ........................................... 1,200

Merchandise Inventory ..............................

1,200

To record cost of the July 8 sale.

Merchandise Inventory ..................................... 2,300

Accounts PayableLane ..........................

2,300

Purchased goods on credit.

11

Accounts PayableLane .................................

Merchandise Inventory ..............................

200
200

Received credit memo from returning

goods to supplier.

12

Cash ....................................................................
Sales Discounts (2%) ........................................
Accounts ReceivableCoke ....................
Collected receivable within the discount period.

784
16
800

Problem 5-2A
July 16 Accounts PayableBlack ................................ 6,000
Merchandise Inventory (1%) .....................
Cash ............................................................

60
5,940

Paid payable within discount period.

19 Accounts ReceivableAKP ............................. 1,250

Sales............................................................

1,250

Sold goods on credit.

19 Cost of Goods Sold ...........................................

Merchandise Inventory ..............................

900
900

To record cost of the July 19 sale.

21 Sales Returns and Allowances ........................

Accounts ReceivableAKP .....................

150
150

Issued credit memo for allowance on

goods sold to customer.

24 Accounts PayableLane ................................. 2,100

Merchandise Inventory * ...........................
Cash ............................................................

42
2,058

Paid payable in discount period (*2% x $2,100).

30 Cash .................................................................... 1,078

Sales Discounts (2%) ........................................
22
Accounts ReceivableAKP .....................

1,100

Collected receivable within discount period.

[($1,250 - $150) x .02]

31 Accounts ReceivableCoke ............................ 5,000

Sales............................................................

5,000

Sold goods on credit.

31 Cost of Goods Sold ........................................... 3,200

Merchandise Inventory ..............................
To record cost of the July 31 sale.

3,200

Teamwork in Action

BTN 5-6

1.
a. Net sales computation:
Sales ............................................................................
Less: Sales discounts .............................................
Sales returns and allowances ......................
Net sales .....................................................................

$430,000
$ 6,600
18,000

b. Total cost of merchandise purchases computation:

Invoice cost of merchandise purchases ....................
Less: Purchase discounts received..........................
Purchase returns and allowances ..................
Add costs of transportation-in ....................................
Total cost of merchandise purchases ........................
c. Cost of goods sold computation:
Merchandise inventory, Beginning.............................
Total cost of merchandise purchased (from b) .........
Merchandise available for sale ...................................
Merchandise inventory, Ending ..................................
Cost of goods sold .......................................................

24,600
$405,400

$180,000
(4,500)
(5,500)
11,000
$181,000

$ 49,000
181,000
$230,000
(42,000)
$188,000

d. Gross profit computation:

Net sales (from a) ........................................................
Less: Cost of goods sold (from c) .............................
Gross profit .................................................................

$405,400
188,000
$217,400

e. Net income computation:

Gross profit from sales (from d) ...............................
Operating expenses (given) ......................................
Net income ..................................................................

$217,400
20,000
$197,400

2. Net income is $197,400.

3. The inventory account balance is $42,000. If actual (physical) inventory
is $38,000, a $4,000 loss from inventory shrinkage occurred. This would
result in an adjustment necessitating a reduction (credit) to the inventory
account and an increase (debit) to cost of goods sold. This $4,000
increase in cost of goods sold would result in a corresponding decrease
in both gross profit and net income. This means that net income would
decline to $193,400.