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Suggested Solutions Worksheet 5 Merchandising Businesses

Tutorial Questions
Question 1
Date May 3 May 7 May 8 May 10 May 13 May 16 Accounts & Explanations Office Supplies Cash Purchases Accounts Payable Accounts Payable Purchases Returns & Allowances Cash Sales Accounts Receivable Sales Accounts Payable Purchase Discount Cash Sales Returns & Allowances Accounts Receivable Purchases Accounts Payable Accounts Payable Cash Purchase Discount Cash Sales Discount Accounts Receivable POST REF Dr $ 300 2,000 2,000 1,000 1,000 450 450 3,900 3,900 1,000 30 970 900 900 4,000 4,000 4,000 3,920 80 2,940 60 3,000 Cr $ 300

May 17 May 18 May 26

May 28

Question 3 Part (i) Date a) b) c) d) e) f) g) General Journal Accounts & Explanation Supplies Expense Supplies Rent Expense Prepaid Rent Unearned Sales Revenue Sales Revenue Depreciation Expense-Furniture & Fixtures
Accumulated Depreciation Furniture & Fixtures
POST REF.

Dr $ 2,580

Cr $ 2,580

5,000 5,000 1,100 1,100 2,650 2,650 1,300 1,300 600 600 5,300 5,300

Salary Expense Salary Payable Interest Expense Interest Payable Inventory COGS

Part (ii)

WEN TENG COMPANY Income Statement For Year Ended 31/12/93

Sales Revenue Less: Sales Discount Sales Returns & Allowances Net Sales Less: COGS GROSS PROFIT Less Operating Expenses: Salary Expense Rent Expense Utilities Expense Depreciation Expense: Furniture & Fixture Supplies Expense OPERATING INCOME Other Revenues & Expenses: Interest Expense NET INCOME

10,300 8,200

$347,800 18,500 $329,300 (166,470) 162,830 84,050 12,000 5,800 2,650 2,580

(107,080) 55,750 (3,500) $52,250

WEN TENG COMPANY Statement of Owners Equity For Year Ended 31/12/93

Wen Teng, Capital 1/1/93 Add: Net Income Less: Wen Teng, Withdrawals Wen Teng, Capital, 31/12/93
WEN TENG COMPANY Balance Sheet December 31, 1993

$23,680 52,250 75,930 (48,000) $27,930

Current Assets Cash Accounts Receivable Inventory Supplies Prepaid Rent Total Current Assets Long-Term Assets Furniture & Fixtures Accumulated Dep.- Furniture & Fixtures Total Assets Liabilities Current Liabilities Accounts Payable Salary Payable Interest Payable Unearned Sales Revenue Total Current Liabilities L-T Liabilities Notes Payable, Long-Term Total Liabilities Owners Equity Wen Teng, Capital Total Liabilities & Owners Equity

Assets

$ 5,670 37,100 65,800 1,350 1,000 110,920

26,500 (23,850)

2,650 $113,570

46,340 1,300 600 2,400 50,640 35,000 85,640 27,930 $113,570

Wen Teng Company Closing Entries December 31, 1993 Folio Sales Revenue Income summary To close Sales Revenue Account Income Summary Sales Discount Sales Returns and Allowances COGS Salary Expense Rent Expense Utilities Expense Depreciation Expense: Furniture & Fixture Supplies Expense Interest Expense To close IS a/cs with DR. balance Income Summary Wen Teng, Capital 52,250 52,250 295,550 10,300 8,200 166,470 84,050 12,000 5,800 2,650 2,580 3,500 Dr.$ 347,800 Cr.$ 347,800

To close Income Summary to Capital Wen Teng, Capital Wen Teng, Withdrawals To close withdrawals account 48,000 48,000

Question 3 Latham Sales Company Income Statement For the year ended March 31, 2004 $ Sales Revenue Less: Sales discounts Sales returns and allowances Net sales Less COGS: Opening merchandise inventory Purchases Less: Purchases discount Purchases returns and allowances Net purchases Add: Freight-in Net cost of purchases Cost of goods available for sale Less Ending merchandise inventory Cost of goods sold $ 4,800 11,300 $ 442,210 (16,100) 426,110 130,050 233,000 3,100 7,600 (10,700) 222,300 10,000 232,300 362,350 (133,200) (229,150) 196,960 80,000 25,900 6,000 1,840 1,000 3,000 (117,740) 79,220 9,630 $

Gross Profit

Operating expenses; Sales commission expense Salary expense Rent expense Utilities expense Depreciation expense: furniture Insurance expense Total operating expenses

Operating Income Other revenues: Net Income

Interest revenue

88,850
Latham Sales Company Statement of Owners Equity For the year ended March 31, 2004

Capital, Ben Latham as at April 1, 2003 Add: Net income Less: Withdrawals, Ben Latham Capital, Ben Latham as at March 31, 2004

$172,780 88,850 261,630 (66,040) 195,590

Latham Sales Company Balance Sheet As at March 31, 2004 $ Assets Current assets Cash Notes receivable Interest receivable Inventory Prepaid insurance Total current assets Investments Notes receivable Plant Assets Furniture Less: accumulated depreciation Total assets Liabilities Current liabilities Accounts payable Sales commission payable Salary payable Unearned sales revenue Total liabilities Owners equity Ben Latham, Capital Total liabilities and owners equity 7,880 12,400 1,030 133,200 600 155,110 62,000 6,000 (5000) $

1,000 218,110

12,220 1,700 1,200 7,400 22,520 195,590 218,110

Latham Sales Company Closing Entries March 31, 2004 Folio Sales revenue Interest revenue Purchases discount Purchases returns and allowances Inventory Income summary To close IS a/cs with CR. balances & establish ending inventory balance Income summary Sales discount Sales returns and allowances Purchases Freight-in Sales commission expense Salary expense Rent expense Utilities expense Depreciation expense: furniture Insurance expense Inventory To close IS a/cs with DR. balance and remove opening inventory balance Income summary Ben Latham, Capital To close income summary to capital Ben Latham, Capital Ben Latham, Withdrawals To close withdrawals account 66,040 66,040 88,850 88,850 Dr.$ 442,210 9,630 3,100 7,600 133,200 Cr.$

595,740

506,890 4,800 11,300 233,000 10,000 80,000 25,900 6,000 1,840 1,000 3,000 130,050

Question 3 Name of Account Cash Notes Receivable, Current Interest Receivable Inventory Prepaid Insurance Notes Receivable, Long-Term Furniture Accum. Depreciation-Furniture Accounts Payable Sales Commission Payable Salary Payable Unearned Sales Revenue Ben Latham, Capital Ben Latham, Drawings Sales Revenue Sales Discount Sales Returns and Allowances Interest Revenue Purchases Purchases Discount Purchases Returns & Allowances Freight In Sales Commission expense Salary expense Rent Expense Utilities Expense Depreciation Expense Furniture Insurance Expense Net Income

Unadjusted Trial Balance Dr. Cr. $7,880 12,400 130,050 3,600 62,000 6,000 4,000 12,220

Adjustments Dr. Cr.

1,030(a) 3,000(b)

1,000(c) 1,700(f) 1,200(e)

Adjusted Trial Balance Dr. Cr. 7,880 12,400 1,030 130,050 600 62,000 6,000 5,000 12,220 1,700 1,200 7,400 172,780 66,040

Income Statement Dr. Cr.

130,050

133,200

Balance Sheet Dr. Cr. 7,880 12,400 1,030 133,200 600 62,000 6,000 5,000 12,220 1,700 1,200 7,400 172,780 66,040

9,610 172,780 66,040 440,000 4,800 11,300 8,600 233,000 3,100 7,600 10,000 78,300 24,700 6,000 1,840 _______ $657,910 _______ 657,910

2,210(d)

2,210(d) 4,800 11,300 1,030(a) 233,000

442,210 4,800 11,300 9,630 233,000 3,100 7,600

442,210

9,630 3,100 7,600 10,000 80,000 25,900 6,000 1,840 1,000 3,000 506,890 88,850 595,740

1,700(f) 1,200(e)

1,000(c) 3,000(b) 10,140

_______ 10,140

10,000 80,000 25,900 6,000 1,840 1,000 3,000 662,840

______ 662,840

______ 595,740

______ 289,150

88,850 289,150

Practice Question
Adjusting Journal Entries
Date (i) (ii) (ii) (iii) Accounts & Explanations Stores Supplies Expense Store Supplies Depreciation Expense Store Equip. Accumulated Dep. - Store Equip. Depreciation Expense Delivery Equipment Accumulated Dep. Delivery Equip. Interest Expense Interest Payable POST REF Dr $ 3,000 8,000 8,000 6,000 6,000 10,000 10,000 Cr $ 3,000

MALL FASHION CENTRE Income Statement For Year Ended 30/11/$ $ Sales Less: Sales Returns and Allowances Less COGS:Beginning Inventory Purchases Less: Purchase Discount Purchases Returns & Allowances Net Purchases Add: Freight In Cost of Goods Available for Sale Ending Inventory GROSS PROFIT Less Operating Expenses:Selling Expenses: Salaries expense Advertising Expense Utilities Expense Delivery Expense Rent Expense Dep. Expense Delivery Equip. Administrative Expenses: Salaries Utilities Expense Repair Expense Rent Expense Dep. Expense Store Equipment Stores Supplies Expense OPERATING INCOME Other Expenses: Interest Expense NET LOSS

$ 746,600 4,200 38,000

$ 742,400

503,600 3,700 6,900 (10,600) 493,000 10,800

503,800 541,800 (47,600)

(494,200) 248,200

98,000 26,400 13,600 16,700 19,200 6,000 42,000 3,400 9,100 4,800 8,000 3,000

179,900

70,300

(250,200) (2,000) (10,000) (12,000)

MALL FASHION CENTRE

Statement of Owners Equity For Year Ended 30/11/R. Ford, Capital 1/12/Net Loss Less: Drawings R. Ford, Capital, 30/11/MALL FASHION CENTRE Balance Sheet As at 30/11/ASSETS Current Assets Cash Accounts Receivable Merchandise Inventory Store Supplies Total Current Assets Plant Assets Store Equipment Less: Accumulated Depreciation Store Equipment 110,000 (12,000) 98,000 (12,000) 86,000

$ 15,900 34,500 47,600 2,500

100,500 85,000 (26,000) 59,000

Delivery Equipment 48,000 Less: Accumulated Depreciation Delivery Equipment (12,000) 36,000 95,000 Total Assets 195,500 LIABILITIES Current Liabilities Notes Payable 20,000 Accounts Payable 49,500 Interest Payable 10,000 Total Current Liabilities 79,500 L-T Liabilities Notes Payable Total Liabilities OWNERS EQUITY R. Ford, Capital Total Liabilities & Owners Equity

30,000 109,500

86,000 195,500

Part c Date (i) (ii)

Closing Entries Accounts & Explanations Sales Income Summary Income Summary Sales Returns & Allowances COGS Salaries Advertising Expense Utilities Expense Repair expense Delivery expense Rent Expense Store supplies Expense Depreciation Expense - Store Equipment - Delivery Equipment Interest Expense R. Ford, Capital Income Summary R. Ford, Capital R. Ford, Drawings

POST REF

Dr $ 746,600 758,600

Cr $ 746,600 4,200 494,200 140,000 26,400 17,000 9,100 16,700 24,000 3,000 8,000 6,000 10,000

(iii) (iv)

12,000 12,000 12,000 12,000

Part e Total of Post Closing T-B $233,500