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

2. 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.

3. 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.

4. 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.

5. 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.