Merchandise Operations Chapter 5 Merchandise Operations Demonstration Problems © 2016 Dr. Moon.

E5-17: DEMO PROBLEM 1 Hartford Jewelers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required. Jun. 20 Purchased inventory of $5,400 on account from Surry Diamonds, a jewelry importer. Terms were 3/15, n/45, FOB shipping point. 20 Paid freight charges, $300. Jul. 4 Returned $900 of inventory to Surry Diamonds. 14 Paid Surry Diamonds, less return. 16 Purchased inventory of $3,800 on account from Swift Diamonds, a jewelry importer. Terms were 3/10, n/EOM, FOB destination. 18 Received a $800 allowance from Swift for damaged but usable goods. 24 Paid Swift Diamonds, less allowance and discount. © 2016 Dr. Moon.

E5-18: DEMO PROBLEM 2 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. Sales $88,600 $115,000 $65,100 $ (f) Sales Returns and Allowances 990 (b) 1,630 850 Sales Discounts 660 440 2,000 Net Sales 86,950 98,120 (d) (g) Cost of Goods Sold 60,200 (c) 41,200 76,200 Gross Profit (a) $31,720 (e) $35,950 © 2016 Dr. Moon.

Business Reduction Systems Adjusted Trial Balance E5-22: DEMO PROBLEM 3 The adjusted trial balance of Business Reduction Systems at March 31, 2016, follows: Business Reduction Systems Adjusted Trial Balance March 31, 2016 Balance Account Title Debit Credit Cash $4,100   Accounts Receivable 13,800 Merchandise Inventory 31,300 Office Supplies 6,100 Equipment 42,200 Accumulated Depreciation—Equipment $13,100 Accounts Payable 9,000 Salaries Payable 500 Notes Payable, long-term 8,000 Boxer, Capital 14,100 Boxer, Withdrawals 40,000 Sales Revenue 234,000 Sales Returns and Allowances 1,500 Sales Discounts 1,900 Cost of Goods Sold 93,600 Selling Expense 27,600 Administrative Expense 14,600 Interest Expense 2,000 Total $278,700 © 2016 Dr. Moon.

E5-22 – E5-24: DEMO PROBLEM 3 (con’t.) Requirements 1. Journalize the required closing entries at March 31, 2016. 2. Set up T-accounts for Income Summary; Boxer, Capital; and Boxer, Withdrawals. Post the closing entries to the T-accounts and calculate their ending balances. 3. How much was Business Reduction’s net income or net loss? 4. Prepare Business Reduction’s single-step income statement for the year ended March 31, 2016. 5. Prepare Business Reduction’s multi-step income statement for the year ended March 31, 2016. © 2016 Dr. Moon.