Chapter 5 Merchandising Operations

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Presentation transcript:

Chapter 5 Merchandising Operations Demonstration Problems © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-17 Progress Fertilizers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required. Jan. 2 Purchased inventory of $12,000 on account from Yield Chemical Limited , a chemical importer. Terms were 2/10, n/45, FOB shipping point. 2 Paid freight charges, $900. 10 Returned $1,200 of inventory to Yield Chemicals. 18 Paid Yield Chemicals, less return. 20 Purchased inventory of $8,000 on account from Taylor Chemicals, a chemicals importer. Terms were 3/10, n/EOM, FOB destination. 21 Received a $500 allowance from Taylor for damaged but usable goods. 24 Paid Taylor Chemicals, less allowance and discount. © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 2 Purchased inventory of $12,000 on account from Yield Chemical Limited , a chemical importer. Terms were 2/10, n/45, FOB shipping point. Date Accounts and Explanation Debit Credit Jan. 2 Merchandise Inventory 12,000 Accounts Payable © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 2 Paid freight charges, $900. Date Accounts and Explanation Debit Credit Jan. 2 Merchandise Inventory 900 Cash © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 10 Returned $1,200 of inventory to Yield Chemicals. Date Accounts and Explanation Debit Credit Jan. 10 Accounts Payable 1,200 Merchandise Inventory © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 18 Paid Yield Chemicals, less return. Date Accounts and Explanation Debit Credit Jan. 18 Accounts Payable ($12,000 − $1,200) 10,800 Cash © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 20 Purchased inventory of $8,000 on account from Taylor Chemicals, a chemicals importer. Terms were 3/10, n/EOM, FOB destination. Date Accounts and Explanation Debit Credit Jan. 20 Merchandise Inventory 8,000 Accounts Payable © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 21 Received a $500 allowance from Taylor for damaged but usable goods. Date Accounts and Explanation Debit Credit Jan. 21 Accounts Payable 500 Merchandise Inventory © 2016 Pearson Education, Inc.

Accounts and Explanation Demonstration of E5-17 Jan. 24 Paid Taylor Chemicals, less allowance and discount. Date Accounts and Explanation Debit Credit Jan. 24 Accounts Payable ($8,000 − $500) 7,500 Cash ($7,500 − $225) 7,275 Merchandise Inventory ($7,500 × 0.03) 225 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 (b) 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 (d) (g) Cost of Goods Sold 60,000 (c) 50,400 85,000 Gross Profit (a) $40,000 (e) $35,000 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 (b) 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 (d) (g) Cost of Goods Sold 60,000 (c) 50,400 85,000 Gross Profit $28,600 $40,000 (e) $35,000 a. Gross Profit = $28,600 ﴾$88,600 − $60,000﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 (d) (g) Cost of Goods Sold 60,000 (c) 50,400 85,000 Gross Profit $28,600 $40,000 (e) $35,000 b. Sales Returns and Allowances = $9,000 ﴾$120,000 − $110,000 − $1,000﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 (d) (g) Cost of Goods Sold 60,000 70,000 50,400 85,000 Gross Profit $28,600 $40,000 (e) $35,000 c. Cost of Goods Sold = $70,000 ﴾$110,000 − $40,000﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 72,400 (g) Cost of Goods Sold 60,000 70,000 50,400 85,000 Gross Profit $28,600 $40,000 (e) $35,000 d. Net Sales = $72,400 ﴾$75,000 − $2,000 − $600﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 72,400 (g) Cost of Goods Sold 60,000 70,000 50,400 85,000 Gross Profit $28,600 $40,000 $22,000 $35,000 e. Gross Profit = $22,000 ﴾$72,400 − $50,400﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 72,400 120,000 Cost of Goods Sold 60,000 70,000 50,400 85,000 Gross Profit $28,600 $40,000 $22,000 $35,000 g. Net Sales = $120,000 ﴾$85,000 + $35,000﴿ © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. Demonstration of E5-18 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $90,000 $120,000 $75,000 $121,800 Sales Returns and Allowances 900 9,000 2,000 1,000 Sales Discounts 500 600 800 Net Sales 88,600 110,000 72,400 120,000 Cost of Goods Sold 60,000 70,000 50,400 85,000 Gross Profit $28,600 $40,000 $22,000 $35,000 f. Sales = $121,800 ﴾$120,000 + $800 + $1,000﴿ © 2016 Pearson Education, Inc.

Demonstration of E5-22, E5-23, & E5-24 The adjusted trial balance of Leading Business Systems at March 31, 2016, follows: LEADING BUSINESS SYSTEMS Adjusted Trial Balance March 31, 2016 Balance Account Title Debit Credit Cash $3,000 Accounts Receivable 10,000 Merchandise Inventory 40,000 Office Supplies 7,500 Equipment 45,000 Accumulated Depreciation—Equipment $18,000 Accounts Payable 15,000 Salaries Payable 2,500 Notes Payable, long-term 11,100 Common Stock 30,000 Retained Earnings 20,000 Dividends 55,000 Sales Revenue 300,000 Sales Returns and Allowances 3,000 Sales Discounts Cost of Goods Sold 180,000 Selling Expense Administrative Expense 18,000 Interest Expense 2,600 Total $396,600 © 2016 Pearson Education, Inc.

Demonstration of E5-22, E5-23, & E5-24 Requirements E5-22 1. Journalize the required closing entries at March 31, 2016. 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 Leading’s net income or net loss? E5-23 Prepare Leading’s single-step income statement for the year ended March 31, 2016. E5-24 Prepare Leading’s multi-step income statement for the year ended March 31, 2016. © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 1 & Req. 2 Accounts and Explanation Date Accounts and Explanation Debit Credit Mar. 31 Sales Revenue 300,000 Income Summary Income Summary 300,000 Clos. 1 © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 1 & Req. 2 Accounts and Explanation Date Accounts and Explanation Debit Credit Mar. 31 Income Summary 236,100 Sales Returns and Allowances 3,000 Sales Discounts 2,500 Cost of Goods Sold 180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Income Summary Clos. 2 236,100 300,000 Clos. 1 63,900 Bal. © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 1 & Req. 2 Accounts and Explanation Date Accounts and Explanation Debit Credit Mar. 31 Income Summary 63,900 Retained Earnings Income Summary Clos. 2 236,100 300,000 Clos. 1 63,900 Bal. Clos. 3 Retained Earnings 20,000 Adj. bal. 63,900 Clos. 3 © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 1 & Req. 2 Accounts and Explanation Date Accounts and Explanation Debit Credit Mar. 31 Retained Earnings 55,000 Dividends Retained Earnings 30,000 Adj. bal. 63,900 Clos. 3 Clos. 4 55,000 28,900 Bal. Dividends Adj. bal. 55,000 Clos.4 Bal. © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 3 Sales Revenue 300,000 Sales Returns and Allowances 3,000 Sales Discounts 2,500 Cost of Goods Sold 180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Net Income ═ Revenues − Expenses © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 3 Sales Revenue 300,000 Sales Returns and Allowances 3,000 Sales Discounts 2,500 Cost of Goods Sold 180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Net Income ═ Revenues − Expenses $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿ © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 3 Sales Revenue 300,000 Sales Returns and Allowances 3,000 Sales Discounts 2,500 Cost of Goods Sold 180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Net Income ═ Revenues − Expenses $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿ $300,000 − $236,100 © 2016 Pearson Education, Inc.

Demonstration of E5-22-Req. 3 Sales Revenue 300,000 Sales Returns and Allowances 3,000 Sales Discounts 2,500 Cost of Goods Sold 180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Net Income ═ Revenues − Expenses $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿ $300,000 − $236,100 $63,900 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 Administrative Expense 18,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Total Expenses 230,600 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 Administrative Expense 18,000 Interest Expense 2,600 Total Expenses 230,600 Net Income $63,900 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-23 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 Total Operating Expenses 48,000 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 Total Operating Expenses 48,000 Operating Income 66,500 © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 Total Operating Expenses 48,000 Operating Income 66,500 Other Revenues and (Expenses): Interest Expense (2,600) © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 Total Operating Expenses 48,000 Operating Income 66,500 Other Revenues and (Expenses): Interest Expense (2,600) Total Other Revenues and (Expenses) © 2016 Pearson Education, Inc.

LEADING BUSINESS SYSTEMS Demonstration of E5-24 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2016 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500 Cost of Goods Sold 180,000 Gross Profit 114,500 Operating Expenses: Selling Expenses 30,000 Administrative Expenses 18,000 Total Operating Expenses 48,000 Operating Income 66,500 Other Revenues and (Expenses): Interest Expense (2,600) Total Other Revenues and (Expenses) Net Income $63,900 © 2016 Pearson Education, Inc.

© 2016 Pearson Education, Inc. End of Chapter 5 © 2016 Pearson Education, Inc.