1. BUA111: Accounting I
Chapter 5: Accounting for Merchandising Firms: Practice Problem Solutions
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2. Chp. 5 In Class Exercises
Do Problem PE6-1A on posted lab problem sheet
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3. PE6-1A
PE 6–1A: Gross Profit Calculation $315,000 ($275,000 + $990,000 – $950,000)
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4. PE6-1B
PE 6–1B $95,000 ($40,000 + $415,000 – $360,000)
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5. PE6-2A
PE 6–2A: Merchandising Journal Entries a. Accounts Receivable 29,000 Sales 29,000 Cost of Merchandise Sold 21,750 Merchandise Inventory 21,750 b. Cash 28,420 Sales Discounts 580 Accounts Receivable 29,000
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6. PE6-2B
PE 6–2B: Merchandising Journal Entries a. Accounts Receivable 60,000 Sales 60,000 Cost of Merchandise Sold 40,000 Merchandise Inventory 40,000 b. Cash 59,400 Sales Discounts 600 Accounts Receivable 60,000
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7. PE6-3A
a. $7,350. Purchase of $9,000 less the return of $1,500 less the discount of $150 [($9,000 – $1,500) × 2%)]. b. Merchandise Inventory
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8. PE6-3B
a. $25,740. Purchase of $30,000 less the return of $4,000 less the discount of $260 [($30,000 – $4,000) × 1%]. b. Accounts Payable
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9. PE6-4A
PE 6–4A
a. $108,950. Purchase of $120,000 less return of $15,000 less the discount of $1,050 [($120,000 – $15,000) × 1%] plus $5,000 of shipping.
$86,240. Purchase of $90,000 less return of $2,000 less the discount of $1,760 [($90,000 – $2,000) × 2%].
Do PE6-4B
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10. PE6-4B
PE 6–4B a. $17,820. Purchase of $20,000 less return of $2,000 less the discount of $180 [($20,000 – $2,000) × 1%]. b. $16,910. Purchase of $18,000 less return of $1,000 less the discount of $340 [($18,000 – $1,000) × 2%] plus $250 of shipping.
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11. PE6-5A
PE 6–5A Storall Co. journal entries: Cash ($8,000 – $1,000 – $140) 6,860 Sales Discounts [($8,000 – $1,000) × 2%] 140 Accounts Receivable—Bunting Co. ($8,000 – $1,000) 7,000 Bunting Co. journal entries: Accounts Payable—Storall Co. ($8,000 – $1,000) 7,000 Merchandise Inventory [($8,000 – $1,000) × 2%] 140 Cash ($8,000 – $1,000 – $140) 6,860 Do PE6-5B
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12. PE6-5B PE 6–5B SPA Co. journal entries:
Cash ($25,000 – $500 + $675) 25,175
Sales Discounts ($25,000 × 2%)
Accounts Receivable—Boyd Co. ($25,000 + $675) ,675
Boyd Co. journal entries:
Accounts Payable—SPA Co. ($25,000 + $675) ,675
Merchandise Inventory ($25,000 × 2%)
Cash ($25,000 – $500 + $675) ,175
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13. PE6-7A
PE 6–7A a
Ratio of net sales to assets 1.6* 1.8**
*$880,000/[($500,000 + $600,000)/2]
**$787,500/[($375,000 + $500,000)/2]
b. The change from 1.8 to 1.6 indicates an unfavorable trend in using assets to generate sales.
DO PE6-7B
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14. PE6-7B
PE 6–7B a Ratio of net sales to assets 3.0* 2.5** *$675,000/[($200,000 + $250,000)/2] **$475,000/[($180,000 + $200,000)/2] b. The change from 2.5 to 3.0 indicates a favorable trend in using assets to generate sales.
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