1. Chapter 5 Demonstration Problems Merchandising Operations Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-1

2. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-2 Progress Fertilizers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required. E5-17D Jan. 2Purchased inventory of $12,000 on account from Yield Chemical Limited, a chemical importer. Terms were 2/10, n/45, FOB shipping point. 2Paid freight charges, $900. 10Returned $1,200 of inventory to Yield Chemicals. 18Paid Yield Chemicals, less return. 20Purchased inventory of $8,000 on account from Taylor Chemicals, a chemicals Purchased inventory of $8,000 on account from Taylor Chemicals, a chemicals importer. Terms were 3/10, n/EOM, FOB destination. 21Received a $500 allowance from Taylor for damaged but usable goods. 24Paid Taylor Chemicals, less allowance and discount.

3. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-3 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. E5-17D DateAccounts and ExplanationDebitCredit Jan. 2 Merchandise Inventory12,000 Accounts Payable 12,000

4. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-4 Jan. 2 Paid freight charges, $900. E5-17D DateAccounts and ExplanationDebitCredit Jan. 2 Merchandise Inventory900 Cash 900

5. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-5 Jan. 10 Returned $1,200 of inventory to Yield Chemicals. E5-17D DateAccounts and ExplanationDebitCredit Jan. 10 Accounts Payable1,200 Merchandise Inventory 1,200

6. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-6 Jan. 18 Paid Yield Chemicals, less return. E5-17D DateAccounts and ExplanationDebitCredit Jan. 18 Accounts Payable ($12,000 − $1,200)10,800 Cash 10,800

7. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-7 Jan. 20 Purchased inventory of $8,000 on account from Taylor Chemicals, a chemicals importer. Terms were 3/10, n/EOM, FOB destination. E5-17D DateAccounts and ExplanationDebitCredit Jan. 20 Merchandise Inventory8,000 Accounts Payable 8,000

8. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-8 Jan. 21 Received a $500 allowance from Taylor for damaged but usable goods. E5-17D DateAccounts and ExplanationDebitCredit Jan. 21 Accounts Payable500 Merchandise Inventory 500

9. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-9 Jan. 24 Paid Taylor Chemicals, less allowance and discount. E5-17D DateAccounts and ExplanationDebitCredit Jan. 24 Accounts Payable ($8,000 − $500)7,500 Cash ($7,500 − $225) 7,275 Merchandise Inventory ($7,500 × 0.03) 225

10. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-10 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 900(b)2,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 (d) (g) Cost of Goods Sold60,000 (c)50,40085,000 Gross Profit(a)$40,000(e) $35,000

11. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-11 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 900(b)2,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 (d) (g) Cost of Goods Sold60,000 (c)50,40085,000 Gross Profit$28,600$40,000(e) $35,000 a.Gross Profit = $28,600 ﴾$88,600 − $60,000﴿

12. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-12 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 (d) (g) Cost of Goods Sold60,000 (c)50,40085,000 Gross Profit$28,600$40,000(e) $35,000 b.Sales Returns and Allowances = $9,000 ﴾$120,000 − $110,000 − $1,000﴿

13. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-13 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 (d) (g) Cost of Goods Sold60,000 70,00050,40085,000 Gross Profit$28,600$40,000(e) $35,000 c.Cost of Goods Sold = $70,000 ﴾$110,000 − $40,000﴿

14. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-14 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 72,400 (g) Cost of Goods Sold60,000 70,00050,40085,000 Gross Profit$28,600$40,000(e) $35,000 d.Net Sales = $72,400 ﴾$75,000 − $2,000 − $600﴿

15. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-15 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000$ (f) Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 72,400 (g) Cost of Goods Sold60,000 70,00050,40085,000 Gross Profit$28,600$40,000$22,000 $35,000 e.Gross Profit = $22,000 ﴾$72,400 − $50,400﴿

16. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-16 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000 $ (f) Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 72,400 120,000 Cost of Goods Sold60,000 70,00050,40085,000 Gross Profit$28,600$40,000$22,000 $35,000 g.Net Sales = $120,000 ﴾$85,000 + $35,000﴿

17. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-17 Consider the following incomplete table of merchandiser’s profit data. Calculate the missing amounts to complete the table. E5-18D Sales $90,000 $120,000 $75,000 $121,800 Sales Returns and Allowances 9009,0002,000 1,000 Sales Discounts 500 1,000600800 Net Sales88,600110,000 72,400120,000 Cost of Goods Sold60,000 70,00050,40085,000 Gross Profit$28,600$40,000$22,000 $35,000 f.Sales = $121,800 ﴾$120,000 + $800 + $1,000﴿

18. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 5-18 The adjusted trial balance of Leading Business Systems at March 31, 2015, follows: E5-22D LEADING BUSINESS SYSTEMS Adjusted Trial Balance March 31, 2015 Balance Account TitleDebitCredit Cash$3,000 Accounts Receivable10,000 Merchandise Inventory40,000 Office Supplies7,500 Equipment45,000 Accumulated Depreciation—Equipment $18,000 Accounts Payable 15,000 Salaries Payable 2,500 Notes Payable, long-term 11,100 Common Stock 30,000 Retained Earnings20,000 Dividends55,000 Sales Revenue 300,000 Sales Returns and Allowances3,000 Sales Discounts2,500 Cost of Goods Sold180,000 Selling Expense30,000 Administrative Expense18,000 Interest Expense2,600 Total$396,600

19. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-19 E5-22D Requirements 1. Journalize the required closing entries at March 31, 2015. 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? 4. Prepare Leading’s single-step income statement for the year ended March 31, 2015. 5. Prepare Leading’s multi-step income statement for the year ended March 31, 2015.

20. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-20 E5-22D—Req. 1 and 2 DateAccounts and Explanation Debit Credit Mar. 31 Sales Revenue 300,000 Income Summary 300,000 Income Summary 300,000Clos. 1

21. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-21 E5-22D—Req. 1 and 2 DateAccounts 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. 2236,100300,000Clos. 1 63,900Bal.

22. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-22 E5-22D—Req. 1 and 2 DateAccounts and Explanation Debit Credit Mar. 31 Income Summary 63,900 Retained Earnings 63,900 Income Summary Clos. 2236,100300,000Clos. 1 63,900Bal. Clos. 363,900 0Bal. Retained Earnings 20,000Adj. bal. 63,900Clos. 3

23. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-23 E5-22D—Req. 1 and 2 DateAccounts and Explanation Debit Credit Mar. 31 Retained Earnings 55,000 Dividends 55,000 Retained Earnings 30,000Adj. bal. 63,900Clos. 3 Clos. 455,000 28,900Bal. Dividends Adj. bal.55,000 Clos.4 Bal.0

24. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-24 E5-22D—Req. 3 Sales Revenue300,000 Sales Returns and Allowances3,000 Sales Discounts2,500 Cost of Goods Sold180,000 Selling Expense30,000 Administrative Expense18,000 Interest Expense2,600 Net Income ═ Revenues − Expenses

25. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-25 E5-22D—Req. 3 Sales Revenue300,000 Sales Returns and Allowances3,000 Sales Discounts2,500 Cost of Goods Sold180,000 Selling Expense30,000 Administrative Expense18,000 Interest Expense2,600 Net Income ═ Revenues − Expenses ═ $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿

26. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-26 E5-22D—Req. 3 Sales Revenue300,000 Sales Returns and Allowances3,000 Sales Discounts2,500 Cost of Goods Sold180,000 Selling Expense30,000 Administrative Expense18,000 Interest Expense2,600 Net Income ═ Revenues − Expenses ═ $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿ ═ $300,000 − $236,100

27. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-27 E5-22D—Req. 3 Sales Revenue300,000 Sales Returns and Allowances3,000 Sales Discounts2,500 Cost of Goods Sold180,000 Selling Expense30,000 Administrative Expense18,000 Interest Expense2,600 Net Income ═ Revenues − Expenses ═ $300,000 − ﴾$3,000 + $2,500 + $180,000 + $30,000+ $18,000 + $2,600﴿ ═ $300,000 − $236,100 ═ $63,900

28. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-28 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Revenues: Net Sales Revenue $294,500

29. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-29 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000

30. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-30 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000

31. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-31 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Revenues: Net Sales Revenue $294,500 Expenses: Cost of Goods Sold $180,000 Selling Expense 30,000 Administrative Expense 18,000

32. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-32 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

33. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-33 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

34. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-34 E5-22D—Req. 4 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

35. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-35 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Sales Revenue $300,000

36. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-36 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500

37. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-37 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000

38. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-38 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 Sales Revenue $300,000 Less: Sales Returns and Allowances 2,500 Sales Discounts 3,000 Net Sales Revenue $294,500

39. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-39 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

40. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-40 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

41. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-41 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

42. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-42 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

43. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-43 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

44. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-44 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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

45. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-45 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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)

46. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-46 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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) (2,600)

47. Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall5-47 E5-22D—Req. 5 LEADING BUSINESS SYSTEMS Income Statement Year Ended March 31, 2015 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) (2,600) Net Income $63,900

48. End of Chapter 5 5-48Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall