1. © 2009 The McGraw-Hill Companies, Inc., All Rights Reserved A CCOUNTING FOR M ERCHANDISING O PERATIONS Chapter 5

2. McGraw-Hill/Irwin Slide 2 McGraw-Hill/Irwin Slide 2 Service organizations sell time to earn revenue. Service organizations sell time to earn revenue. Examples: Accounting firms, law firms and plumbing services Service organizations sell time to earn revenue. Service organizations sell time to earn revenue. Examples: Accounting firms, law firms and plumbing services Net income Equals Expenses Minus Revenues S ERVICE C OMPANIES

3. McGraw-Hill/Irwin Slide 3 McGraw-Hill/Irwin Slide 3 ManufacturerWholesalerRetailerCustomer Merchandising Companies M ERCHANDISING A CTIVITIES C 1

4. McGraw-Hill/Irwin Slide 4 McGraw-Hill/Irwin Slide 4 R EPORTING I NCOME FOR A M ERCHANDISER products Merchandising companies sell products to earn revenue. Examples: sporting goods, clothing, and auto parts stores Net Income MinusEqualsMinusEquals Cost of Goods Sold 商品销售成本 Gross Profit 毛利润 Expenses Net Sales 销售净额 C1

5. McGraw-Hill/Irwin Slide 5 McGraw-Hill/Irwin Slide 5 O PERATING C YCLE FOR A M ERCHANDISER Begins with the purchase of merchandise and ends with the collection of cash from the sale of merchandise. Purchases Merchandise inventory Credit sales Account receivable Cash collection Purchases Merchandise inventory Cash sales Cash Sale Credit Sale C 2

6. McGraw-Hill/Irwin Slide 6 McGraw-Hill/Irwin Slide 6 I NVENTORY S YSTEMS 存货系统 + + + + Beginning inventory Net cost of purchases = = Merchandise available for sale Ending inventory Cost of goods sold C 3

7. McGraw-Hill/Irwin Slide 7 McGraw-Hill/Irwin Slide 7 PERPETUAL AND PERIODIC INVENTORY SYSTEMS 永续盘存制与定期盘存制  Perpetual systems  continually update accounting records for merchandising transactions  Periodic systems  accounting records relating to merchandise transactions are updated only at the end of the accounting period C 3

8. McGraw-Hill/Irwin Slide 8 McGraw-Hill/Irwin Slide 8 M ERCHANDISE P URCHASES On November 2, Z-Mart purchased $1,200 of merchandise inventory for cash. P1

9. McGraw-Hill/Irwin Slide 9 McGraw-Hill/Irwin Slide 9 T RADE D ISCOUNTS 商业折扣 Used by manufacturers and wholesalers to offer better prices for greater quantities purchased. Example Z-Mart offers a 30% trade discount on orders 订单 of 1,000 units or more of their popular product Racer. Each Racer has a list price 价目表价格 of $5.25. Example Z-Mart offers a 30% trade discount on orders 订单 of 1,000 units or more of their popular product Racer. Each Racer has a list price 价目表价格 of $5.25. P1

10. McGraw-Hill/Irwin Slide 10 McGraw-Hill/Irwin Slide 10  Seller 卖方  Invoice date 发票日期  Purchaser 买方  Order date 订单日期  Credit terms 信用条款  Freight terms 运输条款  Goods 商品  Total invoice 发票总价  Seller 卖方  Invoice date 发票日期  Purchaser 买方  Order date 订单日期  Credit terms 信用条款  Freight terms 运输条款  Goods 商品  Total invoice 发票总价         P1

11. McGraw-Hill/Irwin Slide 11 McGraw-Hill/Irwin Slide 11 PURCHASE DISCOUNTS 购买折扣 A deduction 减少 from the invoice price granted 授予 to induce 促使 early payment of the amount due 到期金额. A deduction 减少 from the invoice price granted 授予 to induce 促使 early payment of the amount due 到期金额. Credit Terms 信用条款 Time Amount Due 到期金额 Discount Period 折扣期 Due: Invoice price minus discount Credit Period 信用期 Due: Full Invoice Price Date of Invoice P1

12. McGraw-Hill/Irwin Slide 12 McGraw-Hill/Irwin Slide 12 2/10,n/302/10,n/30 Discount Percent Number of Days Discount Is Available Otherwise, Net (or All) Is Due in 30 Days Credit Period P URCHASE D ISCOUNTS P1

13. McGraw-Hill/Irwin Slide 13 McGraw-Hill/Irwin Slide 13 On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory on account 赊账, credit terms are 2/10, n/30. On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory on account 赊账, credit terms are 2/10, n/30. P URCHASE D ISCOUNTS P1

14. McGraw-Hill/Irwin Slide 14 McGraw-Hill/Irwin Slide 14 On November 12 th, Z-Mart paid the amount due on the purchase of November 2 nd. On November 12 th, Z-Mart paid the amount due on the purchase of November 2 nd. $1,200 × 2% = $24 discount P URCHASE D ISCOUNTS P1

15. McGraw-Hill/Irwin Slide 15 McGraw-Hill/Irwin Slide 15 P URCHASE D ISCOUNTS After we post these entries, the accounts involved look like this: After we post these entries, the accounts involved look like this: Merchandise Inventory Accounts Payable 11/2 1,200 11/12 24 11/12 1,200 Bal. 1,176 Bal. 0 P1

16. McGraw-Hill/Irwin Slide 16 McGraw-Hill/Irwin Slide 16 P URCHASE R ETURNS AND A LLOWANCES Purchase Return... Merchandise returned by the purchaser to the supplier. Merchandise returned by the purchaser to the supplier. Purchase Allowance... A reduction in the cost of defective 有质量 问题的 merchandise received by a purchaser from a supplier. A reduction in the cost of defective 有质量 问题的 merchandise received by a purchaser from a supplier. Purchase Return... Merchandise returned by the purchaser to the supplier. Merchandise returned by the purchaser to the supplier. Purchase Allowance... A reduction in the cost of defective 有质量 问题的 merchandise received by a purchaser from a supplier. A reduction in the cost of defective 有质量 问题的 merchandise received by a purchaser from a supplier. P1

17. McGraw-Hill/Irwin Slide 17 McGraw-Hill/Irwin Slide 17 On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory on account, credit terms are 2/10, n/30. On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory on account, credit terms are 2/10, n/30. P URCHASE R ETURNS AND A LLOWANCES P1

18. McGraw-Hill/Irwin Slide 18 McGraw-Hill/Irwin Slide 18 On November 5 th, Z-Mart returned $300 of defective merchandise to the supplier. On November 5 th, Z-Mart returned $300 of defective merchandise to the supplier. P URCHASE R ETURNS AND A LLOWANCES P1

19. McGraw-Hill/Irwin Slide 19 McGraw-Hill/Irwin Slide 19 On November 12 th, Z-Mart paid the amount owed 所欠金额 for the purchase of November 2 nd. P URCHASE R ETURNS AND A LLOWANCES P1

20. McGraw-Hill/Irwin Slide 20 McGraw-Hill/Irwin Slide 20 T RANSPORTATION C OSTS AND O WNERSHIP T RANSFER 运输成本与所有权转移 FOB shipping point (buyer pays) FOB destination (seller pays) Merchandise Seller Buyer Carrier P1

21. McGraw-Hill/Irwin Slide 21 McGraw-Hill/Irwin Slide 21 T RANSPORTATION C OSTS On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory for cash and also paid $75 transportation costs. On November 2 nd, Z-Mart purchased $1,200 of merchandise inventory for cash and also paid $75 transportation costs. P1

22. McGraw-Hill/Irwin Slide 22 McGraw-Hill/Irwin Slide 22 A CCOUNTING FOR M ERCHANDISE P1 Invoice cost of merchandise purchases235,800$ Less: Less: Purchase discounts(4,200)$ Less: Purchase returns and allowances(1,500) Add: Costs of transportation-in2,300 Total cost of merchandise purchased232,400$

23. McGraw-Hill/Irwin Slide 23 McGraw-Hill/Irwin Slide 23 A CCOUNTING FOR M ERCHANDISE S ALES P2 Z-MART Computation of Gross Profit For Year Ended December 31, 2009 Sales321,000$ Less: Sales discounts4,300$ Sales returns and allowances2,000 6,300 Net sales314,700 Cost of goods sold230,400 Gross profit84,300$

24. McGraw-Hill/Irwin Slide 24 McGraw-Hill/Irwin Slide 24 On November 3 rd, Z-Mart sold $2,400 of merchandise on credit. The merchandise has a cost basis to Z-Mart of $1,600. On November 3 rd, Z-Mart sold $2,400 of merchandise on credit. The merchandise has a cost basis to Z-Mart of $1,600. A CCOUNTING FOR M ERCHANDISE S ALES P2

25. McGraw-Hill/Irwin Slide 25 McGraw-Hill/Irwin Slide 25 Z-Mart completes a credit sale for $1,000 on November 12th, the merchandise cost $800. Terms of 2/10, n/60, and the account was paid in full within the discount period. S ALES D ISCOUNTS P2

26. McGraw-Hill/Irwin Slide 26 McGraw-Hill/Irwin Slide 26 Recall Z-Mart’s sale for $2,400 that had a cost of $1,600. Assume the customer returns part of the merchandise. The returned items sell for $800 and cost $600. S ALES R ETURNS AND A LLOWANCES P2

27. McGraw-Hill/Irwin Slide 27 McGraw-Hill/Irwin Slide 27 Recall the $800 of merchandise sold by Z- Mart to a customer. The merchandise was defective but the customer agreed to keep it because Z-Mart offers a $100 price reduction. S ALES A LLOWANCES P2

28. McGraw-Hill/Irwin Slide 28 McGraw-Hill/Irwin Slide 28 M ERCHANDISING C OST F LOW IN THE A CCOUNTING C YCLE Beginning inventory Net purchases Merchandise available for sale Ending inventory Cost of goods sold To Income Statement To Balance Sheet To Income Statement To Balance Sheet Period 1 Beginning inventory Net purchases Merchandise available for sale Ending inventory Cost of goods sold Period 2 C 4

29. McGraw-Hill/Irwin Slide 29 McGraw-Hill/Irwin Slide 29 A DJUSTING E NTRIES FOR M ERCHANDISERS Z-Mart’s Merchandise Inventory account at the end of 2009 has a balance of $21,250, but a physical count reveals that only $21,000 of inventory exists. Z-Mart suffered a $250 shrinkage 损耗. P3

30. McGraw-Hill/Irwin Slide 30 McGraw-Hill/Irwin Slide 30 C LOSING E NTRIES FOR M ERCHANDISERS P3

31. McGraw-Hill/Irwin Slide 31 McGraw-Hill/Irwin Slide 31 C LOSING E NTRIES FOR M ERCHANDISERS P3

32. McGraw-Hill/Irwin Slide 32 McGraw-Hill/Irwin Slide 32 C LOSING E NTRIES FOR M ERCHANDISERS P3

33. McGraw-Hill/Irwin Slide 33 McGraw-Hill/Irwin Slide 33 C LOSING E NTRIES FOR M ERCHANDISERS P3

34. McGraw-Hill/Irwin Slide 34 McGraw-Hill/Irwin Slide 34 I NCOME S TATEMENT F ORMATS  Multiple-Step  Single-Step  Multiple-Step  Single-Step P4

35. McGraw-Hill/Irwin Slide 35 McGraw-Hill/Irwin Slide 35 M ULTIPLE -S TEP I NCOME S TATEMENT P4

36. McGraw-Hill/Irwin Slide 36 McGraw-Hill/Irwin Slide 36 S INGLE -S TEP I NCOME S TATEMENT P4

37. McGraw-Hill/Irwin Slide 37 McGraw-Hill/Irwin Slide 37 C LASSIFIED B ALANCE S HEET Highly Liquid Less Liquid P4

38. McGraw-Hill/Irwin Slide 38 McGraw-Hill/Irwin Slide 38 A common rule of thumb is the acid-test ratio should have a value of at least 1.0 to conclude a company is unlikely to face liquidity problems in the near future. = Quick Assets 速动资产 Quick Assets 速动资产 Current Liabilities Acid-TestRatio Acid-TestRatio = Cash + S-T Investments + Receivables Cash + S-T Investments + Receivables Current Liabilities Cash + S-T Investments + Receivables Cash + S-T Investments + Receivables Current Liabilities A CID -T EST R ATIO 酸性试验比率 A1

39. McGraw-Hill/Irwin Slide 39 McGraw-Hill/Irwin Slide 39 A CID -T EST R ATIO ($ millions)200720062005 Total quick assets $ 3,010 $ 3,286 $ 4,923 Total current assets 6,648 6,702 8,232 Total current liabilities 3,492 2,762 3,297 Acid-test ratio 0.86 1.19 1.49 Current ratio 1.90 2.43 2.50 Industry acid-test ratio 0.56 0.61 0.66 Industry current ratio 2.43 2.55 2.67 A1

40. McGraw-Hill/Irwin Slide 40 McGraw-Hill/Irwin Slide 40 Percentage of dollar sales available to cover expenses and provide a profit. G ROSS M ARGIN R ATIO 毛利率 A2

41. McGraw-Hill/Irwin Slide 41 McGraw-Hill/Irwin Slide 41 E ND OF C HAPTER 5