C6-1 Accounting for Inventory
C6-1 Accounting for Inventory Orders, Purchases, Sales, Returns,and Discounts (Chapters 5 and 6) [LO 5-4, LO 6-3, LO 6-4, LO6-5]
[The following information applies to the questionsdisplayed below.]
| 1. |
On October 1, the Business Students’ Society (BSS) placed anorder for 100 golf shirts at a unitcost of $21, under terms 2/10. |
| 2. |
The order was received on October 10, but 10 golf shirts hadbeen damaged in shipment. |
| 3. |
On October 11, the damaged golf shirts were returned. |
| 4. |
On October 12, BSS complained that the remaining golf shirtswere slightly defective so the supplier granted a GL $290allowance. |
| 5. |
BSS paid for the golf shirts on October 13. |
| 6. |
During the first week of October, BSS received student andfaculty orders for 90 golf shirts, at a unit price of $39.00, onterms 2/10, n/30. |
| 7. |
The golf shirts were delivered to these customers on October 18.Unfortunately, customers wereunhappy with the golf shirts, so BSS permitted them to be returnedor gave an allowance of $9.00 per shirt. |
| 8. |
On October 21, one-half of the golf shirts were returned. |
| 9. |
On October 22, the remaining 45 customers were granted theallowance on account. |
| 10. |
The customers paid their remaining balances during the week ofOctober 25. |
rev: 02_04_2016_QC_CS-40209
References
Section BreakC6-1 Accounting for InventoryOrders, Purchases, Sales, Returns, and Discounts (Chapters 5 and 6)[LO 5-4, LO 6-3, LO 6-4, LO 6-5]
1.
value:2.50 points
Required information
C6-1 Part 1
| Required: | |
| 1. |
Prepare journal entries for the transactions described above,using the date of each transaction as its reference. Assume BSSuses perpetual inventory accounts. (If no entry is requiredfor a transaction/event, select “No Journal Entry Required” in thefirst account field.) |
rev: 10_19_2016_QC_CS-65599, 11_07_2016_QC_CS-68868
References
eBook & Resources
General JournalDifficulty: 3 HardLearningObjective: 06-04 Analyze sales transactions under a perpetualinventory system.
C6-1 Part 1Learning Objective: 06-03 Analyzepurchase transactions under a perpetual inventory system.LearningObjective: 06-05 Prepare and analyze a merchandiser’s multistepincome statement.
Check my work
2.
value:2.50 points
Required information
C6-1 Part 2
| 2. |
Report the financial effects of the above transactions in amultistep income statement for the month ended October 31 preparedfor internal use. Assume operating expenses, other than cost ofgoods sold, are $100 and income tax expense is $135. |
References
eBook & Resources
Financial StatementsDifficulty: 3 HardLearningObjective: 06-04 Analyze sales transactions under a perpetualinventory system.
C6-1 Part 2Learning Objective: 06-03 Analyzepurchase transactions under a perpetual inventory system.LearningObjective: 06-05 Prepare and analyze a merchandiser’s multistepincome statement.
Check my work
3.
value:2.50 points
Required information
C6-1 Part 3
| 3. |
Determine the percentage of net sales that is available to coveroperating expenses other than cost of goods sold. (Roundyour answers to the nearest whole percentage amount.) |
References
eBook & Resources
WorksheetDifficulty: 3 HardLearning Objective:06-04 Analyze sales transactions under a perpetual inventorysystem.
C6-1 Part 3Learning Objective: 06-03 Analyzepurchase transactions under a perpetual inventory system.LearningObjective: 06-05 Prepare and analyze a merchandiser’s multistepincome statement.
Check my work
4.
value:2.50 points
Required information
C6-1 Part 4
| 4-a. |
As of October 31, the check dated October 13 had not cleared thebank. How should BSS report this on its October 31 bankreconciliation? |
| 4-b. |
Give the journal entry, if any needed as a result of includingthe item discussed in requirement 4-a in the bank. (If noentry is required for a transaction/event, select “No Journal EntryRequired” in the first account field.) |
References
eBook & Resources
General JournalDifficulty: 3 HardLearningObjective: 06-04 Analyze sales transactions under a perpetualinventory system.
C6-1 Part 4Learning Objective: 06-03 Analyzepurchase transactions under a perpetual inventory system.
Answer:
|
Journal entries |
|||
|
Transaction |
General Journal |
Debit |
Credit |
|
1 |
Inventory |
2100 |
|
|
Account payable |
2100 |
||
|
(To record purchase of inventory.) (21*100) |
|||
|
3 |
Account payable |
210 |
|
|
Inventory |
210 |
||
|
(To record damaged golf shirts were returned.) (21*10) |
|||
|
4 |
Account payable |
290 |
|
|
Inventory |
290 |
||
|
(To record BSS complained that the remaining golf shirts wereslightly defective so the supplier granted a GL $290allowance.) |
|||
|
5 |
Account payable |
1600 |
|
|
Cash |
1600 |
||
|
(To record paid for the golf shirts on October 13.)(2100-210-290) |
|||
|
6 |
Account receivable |
3510 |
|
|
Sales revenue |
3510 |
||
|
(To record sales revenue received student and faculty orders for90 golf shirts.) (90*39) |
|||
|
6 |
Cost of goods sold |
1600 |
|
|
Inventory |
1600 |
||
|
(To record cost of goods sold.) (net cost of purchase of 90shirts =2100-210-290) |
|||
|
7 |
Sales return and allowance |
810 |
|
|
Account receivable |
810 |
||
|
(To record gave an allowance of $9.00 per shirt.) (9*90) |
|||
|
9 |
Sales return and allowance |
1350 |
|
|
Account receivable |
1350 |
||
|
(To record 45 golf shirts were returned by customer.) (netprice=39-9=30) (45*30) |
|||
|
9 |
Inventory |
800 |
|
|
Cost of goods sold |
800 |
||
|
(To record cost of goods return.) (1600*45/90) |
|||
|
10 |
Cash (1350-27) |
1323 |
|
|
Sales discount (1350*2%) |
27 |
||
|
Account receivable |
1350 |
||
|
(To record cash received from customer) (3510-810-1350) |
|||
|
Multi step income statement |
||
|
Sales revenue |
3510 |
|
|
Less: Sales return and allowance (810+1350) |
2160 |
|
|
Less: sales discount |
27 |
|
|
Net sales |
1323 |
|
|
Less: cost of goods sold (1600-800) |
800 |
|
|
Gross profit |
523 |
|
|
Less: Operating expense |
100 |
|
|
Income before tax |
423 |
|
|
Less: income tax expense |
135 |
|
|
Net income |
288 |
|
|
Percentage of net sales that is available to coveroperating expenses other than cost of goods sold (Operating expense/ Net sales) |
8% |
|
|
As of October 31, the check dated October 13 had not cleared thebank. How should BSS report this on its October 31 bankreconciliation? |
||
|
Considered under outstanding check. No journal entryrequired for outstanding check. |
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