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P6-5A You are provided with the following information for Pavey Inc. for

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P6-5A You are provided with the following information for Pavey Inc. for the month ended
October 31, 2008. Pavey uses a periodic method for inventory.

  Units Unit Cost or Selling price
1-Oct Beginning inventory  60  $25.00
9-Oct Purchase  120  $26.00
11-Oct Sale  100  $35.00
17-Oct Purchase  70  $27.00
22-Oct Sale  60  $40.00
25-Oct Purchase  80  $28.00
29-Oct Sale  110  $40.00

Instructions
(a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods.
(1) LIFO.
(2) FIFO.
(3) Average-cost.
(b) Compare results for the three cost flow assumptions.

6-4A The management of Morales Co. is reevaluating the appropriateness

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P6-4A The management of Morales Co. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost.They request your help in determining the results of operations for 2008 if either the FIFO method or the LIFO method had been used. For 2008, the accounting records show the following data.

Inventories Purchases and Sales
Beginning (15,000 units) $32,000 Total net sales (215,000 units) $865,000
Ending (30,000 units) Total cost of goods purchased
(230,000 units) 595,000
Quarter Units Unit Cost Total Cost
1 60,000 $2.40 $144,000
2 50,000 2.50 125,000
3 50,000 2.60 130,000
4 70,000 2.80 196,000
230,000 $595,000

Purchases were made quarterly as follows.

Operating expenses were $147,000, and the company’s income tax rate is 34%.

Instructions

(a) Prepare comparative condensed income statements for 2008 under FIFO and LIFO. (Show computations of ending inventory.)

(b) Answer the following questions for management.
(1) Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? Why?

(2) Which cost flow method (FIFO or LIFO) produces the more meaningful net income? Why?

(3) Which cost flow method (FIFO or LIFO) is more likely to approximate actual physical flow of the goods? Why?

(4) How much additional cash will be available for management under LIFO than under FIFO? Why?

(5) Will gross profit under the average-cost method be higher or lower than (a) FIFO and
(b) LIFO? (Note: It is not necessary to quantify your answer.)

P6-3A Eddings Company had a beginning inventory of 400 units of

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P6-3A Eddings Company had a beginning inventory of 400 units of Product XNA at a cost of $8.00 per unit. During the year, purchases were: Feb. 20 600 units at $9 Aug. 12 300 units at $11 May 5 500 units at $10 Dec. 8 200 units at $12

Eddings Company uses a periodic inventory system. Sales totaled 1,500 units.

Instructions

(a) Determine the cost of goods available for sale.

(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.

(c) Which cost flow method results in (1) the lowest inventory amount for the balance sheet, and
(2) the lowest cost of goods sold for the income statement?

P6-2A Glanville Distribution markets CDs of the performing artist Harrilyn Clooney

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P6-2A Glanville Distribution markets CDs of the performing artist Harrilyn Clooney.At the beginning of March, Glanville had in beginning inventory 1,500 Clooney CDs with a unit cost of $7. During March Glanville made the following purchases of Clooney CDs.

March 5      3,000 @ $8        March 21    4,000 @ $10
March 13    5,500 @ $9      March 26      2,000 @ $11

During March 12,500 units were sold. Glanville uses a periodic inventory system.

Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Use three decimal places for average-cost.)
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet and
(2) the highest cost of goods sold for the income statement?

P6-1A Heath Limited is trying to determine the value of its ending inventory at

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P6-1A Heath Limited is trying to determine the value of its ending inventory at February 29, 2008, the company’s year end.The accountant counted everything that was in the warehouse as of February 29, which resulted in an ending inventory valuation of $48,000. However, she didn’t know how to treat the following transactions so she didn’t record them.

(a) On February 26, Heath shipped to a customer goods costing $800. The goods were shipped FOB shipping point, and the receiving report indicates that the customer received the goods on March 2.

(b) On February 26, Seller Inc. shipped goods to Heath FOB destination.The invoice price was $350.The receiving report indicates that the goods were received by Heath on March 2.

(c) Heath had $500 of inventory at a customer’s warehouse “on approval.”The customer was going to let Heath know whether it wanted the merchandise by the end of the week, March 4.

(d) Heath also had $400 of inventory on consignment at a Jasper craft shop.

(e) On February 26, Heath ordered goods costing $750. The goods were shipped FOB shipping point on February 27. Heath received the goods on March 1.

(f) On February 29, Heath packaged goods and had them ready for shipping to a customer FOB destination.The invoice price was $350; the cost of the items was $250.The receiving report indicates that the goods were received by the customer on March 2.

(g) Heath had damaged goods set aside in the warehouse because they are no longer saleable. These goods originally cost $400 and, originally, Heath expected to sell these items for $600.

Instructions
For each of the above transactions, specify whether the item in question should be included in ending inventory, and if so, at what amount. For each item that is not included in ending inventory, indicate who owns it and what account, if any, it should have been recorded in.

*E6-20 Quayle Shoe Store uses the retail inventory method

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Quayle Shoe Store uses the retail inventory method for its two departments,Women’s
Shoes and Men’s Shoes.The following information for each department is obtained.


  Women's Department Men's Department
Beginning inventory at cost   32,000  45,000
Cost of goods purchased at cost   148,000  136,300
Net sales   178,000  185,000
Beginning inventory at retail   46,000  60,000
Cost of goods purchased at retail   179,000  185,000

Instructions
Compute the estimated cost of the ending inventory for each department under the retail inventory
method.

*E6-19 The inventory of Faber Company was destroyed by fire on March 1

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*E6-19 The inventory of Faber Company was destroyed by fire on March 1. From an examination of the accounting records, the following data for the first 2 months of the year are obtained: Sales $51,000, Sales Returns and Allowances $1,000, Purchases $31,200, Freight-in $1,200, and Purchase Returns and Allowances $1,400.

Instructions

Determine the merchandise lost by fire, assuming:

(a) A beginning inventory of $20,000 and a gross profit rate of 40% on net sales.

(b) A beginning inventory of $30,000 and a gross profit rate of 30% on net sales.

*E6-18 Doc Gibbs Company reported the following information for November and December 2008.

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Doc Gibbs Company reported the following information for November and
December 2008.

  November December
Cost of goods purchased  500,000  610,000
Inventory, beginning of month  100,000  120,000
Inventory, end of month  120,000  ??? 
Sales  800,000  1,000,000

Doc Gibbs’s ending inventory at December 31 was destroyed in a fire.

Instructions
(a) Compute the gross profit rate for November.
(b) Using the gross profit rate for November, determine the estimated cost of inventory lost in
the fire

*E6-15 Klugman Appliance uses a perpetual inventory system.

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Klugman Appliance uses a perpetual inventory system. For its flat-screen television sets, the January 1 inventory was 3 sets at $600 each. On January 10, Klugman purchased 6 units at $660 each.The company sold 2 units on January 8 and 4 units on January 15.

Instructions
Compute the ending inventory under (1) FIFO, (2) LIFO, and (3) average-cost.

E6-14 The cost of goods sold computations for O’Brien Company and Weinberg Company

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E6-14 The cost of goods sold computations for O’Brien Company and Weinberg Company are shown below.

   O'Brien Company   Weinberg Company 
Beginning inventory  45,000  71,000
Cost of goods purchased  200,000  290,000
Cost of goods available for sale  245,000  361,000
Ending inventory  55,000  69,000
Cost of goods sold  190,000  292,000

Instructions
(a) Compute inventory turnover and days in inventory for each company.
(b) Which company moves its inventory more quickly?

E6-11 Lebo Hardware reported cost of goods sold as follows.

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Lebo Hardware reported cost of goods sold as follows.

  2008 2009
Beginning inventory   20,000  30,000
Cost of goods purchased   150,000  175,000
Cost of goods available for sale   170,000  205,000
Ending inventory   30,000  35,000
Cost of goods sold   140,000  170,000

Lebo made two errors: (1) 2008 ending inventory was overstated $3,000, and (2) 2009 ending inventory was understated $6,000.

Instructions
Compute the correct cost of goods sold for each year.

E6-10 Conan Company applied FIFO to its inventory and got the following

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E6-10 Conan Company applied FIFO to its inventory and got the following results for its ending inventory.

VCRs 100 units at a cost per unit of $65
DVD players 150 units at a cost per unit of $75
iPods 125 units at a cost per unit of $80

The cost of purchasing units at year-end was VCRs $71,DVD players $69, and iPods $78.

Instructions
Determine the amount of ending inventory at lower-of-cost-or-market.

E6-9 Americus Camera Shop uses the lower-of-cost-or-market basis

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Americus Camera Shop uses the lower-of-cost-or-market basis for its inventory.The following data are available at December 31

  Units Unit Cost Market
Cameras:
   Minolta 5 170 156
   Canon 6 150 152
Light meters:
   Vivitar 12 125 115
   Kodak 14 120 135

Instructions
Determine the amount of the ending inventory by applying the lower-of-cost-or-market basis.

E6-8 Inventory data for Yount Company are presented in E6-6.

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Yount Company reports the following for the month of June.

  Units Unit Cost Total Cost
1-Jun Inventory  200 $5  $1,000
12 Purchase  300 6  $1,800
23 Purchase  500 7  $3,500
30 Inventory  120

Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold using the average-cost
method.
(b) Will the results in (a) be higher or lower than the results under (1) FIFO and (2) LIFO?
(c) Why is the average unit cost not $6?

E6-7 Jones Company had 100 units in beginning inventory at

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Jones Company had 100 units in beginning inventory at a total cost of $10,000.The company
purchased 200 units at a total cost of $26,000. At the end of the year, Jones had 80 units in
ending inventory.

Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2)
LIFO, and (3) average-cost.
(b) Which cost flow method would result in the highest net income?
(c) Which cost flow method would result in inventories approximating current cost in the balance sheet?
(d) Which cost flow method would result in Jones paying the least taxes in the first year?

E6-6 Yount Company reports the following for the month of June.

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E6-6 Yount Company reports the following for the month of June.

Exercises 277
Units Unit Cost Total Cost
June 1 Inventory 200 $5 $1,000
12 Purchase 300 6 1,800
23 Purchase 500 7 3,500
30 Inventory 120

Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO and

(2) LIFO.
(b) Which costing method gives the higher ending inventory? Why?
(c) Which method results in the higher cost of goods sold? Why?

E6-5 Catlet Co. uses a periodic inventory system. Its records show

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E6-5 Catlet Co. uses a periodic inventory system. Its records show the following for the month of May, in which 65 units were sold.

  Units Unit cost Total Cost
1-May Inventory  30 $8  $240
15 Purchases  25 11  $275
24 Purchases 35 12  $420
  90  $935
Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

E6-4 Boarders sells a snowboard, Xpert, that is popular with snowboard enthusiasts

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E6-4 Boarders sells a snowboard, Xpert, that is popular with snowboard enthusiasts. Below is information relating to Boarders’s purchases of Xpert snowboards during September. During the same month, 121 Xpert snowboards were sold. Boarders uses a periodic inventory system. 276 Chapter 6 Inventories

Date Explanation Units Unit Cost Total Cost
Sept. 1 Inventory 26 $ 97 $ 2,522
Sept. 12 Purchases 45 102 4,590
Sept. 19 Purchases 20 104 2,080
Sept. 26 Purchases 50 105 5,250
Totals 141 $14,442

Instructions
(a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

(b) For both FIFO and LIFO, calculate the sum of ending inventory and cost of goods sold.What do you notice about the answers you found for each method?

E6-1 Premier Bank and Trust is considering giving Lima Company a loan

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E6-1 Premier Bank and Trust is considering giving Lima Company a loan. Before doing so, they decide that further discussions with Lima’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $297,000. Discussions with the accountant reveal the following.

1. Lima sold goods costing $38,000 to Comerica Company, FOB shipping point, on December

28.The goods are not expected to arrive at Comerica until January 12.The goods were not included in the physical inventory because they were not in the warehouse.

2. The physical count of the inventory did not include goods costing $95,000 that were shipped
to Lima FOB destination on December 27 and were still in transit at year-end.

3. Lima received goods costing $22,000 on January 2. The goods were shipped FOB shipping point on December 26 by Galant Co.The goods were not included in the physical count.

4. Lima sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Lima’s physical inventory.

5. Lima received goods costing $44,000 on January 2 that were shipped FOB destination on December 29.The shipment was a rush order that was supposed to arrive December 31.This purchase was included in the ending inventory of $297,000.

Instructions
Determine the correct inventory amount on December 31.

E23-22 The May 2012 revenue and cost information for Houston Outfitters, Inc., follows:

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E23-22 Preparing a standard cost income statement [15 min]
The May 2012 revenue and cost information for Houston Outfitters, Inc., follows:

Sales revenue $540,000
Cost of goods sold (standard) 341,000
Direct materials price variance 1,100 F
Direct materials efficiency variance 6,100 F
Direct labor price variance 4,200 U
Direct labor efficiency variance 2,400 F
Variable overhead spending variance 3,300 U
Fixed overhead volume variance 8,100 F
Fixed overhead spending variance 1,400 U
Variable overhead efficiency variance 1,400 U

Requirement

1. Prepare a standard cost income statement for management through gross profit.
Report all standard cost variances for management’s use. Has management done
a good or poor job of controlling costs? Explain.

E23-17 Top managers of Kyler Industries predicted 2012 sales of 14,800 units of its product at

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E23-17 Preparing an income statement performance report [20–25 min]

Top managers of Kyler Industries predicted 2012 sales of 14,800 units of its product at
a unit price of $8.50. Actual sales for the year were 14,600 units at $10.50 each.
Variable costs were budgeted at $2.20 per unit, and actual variable costs were $2.30
per unit. Actual fixed costs of $41,000 exceeded budgeted fixed costs by $4,500.

Requirement

1. Prepare Kyler’s income statement performance report. What variance contributed
most to the year’s favorable results? What caused this variance?

E22-21 Love My Phone is based in Kingswood, Texas. The merchandising company has two

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E22-21 Preparing performance reports for responsibility centers [15–20 min]

Love My Phone is based in Kingswood, Texas. The merchandising company has two
divisions: Cell Phones and MP3 Players. The Cell Phone division has two main product
lines: Basic and Advanced.

The Basic product line includes phones whose primary
function is storing contacts and making/receiving calls. The Advanced product
line includes multi-application phones that, in addition to the Basic phones usage,
contain a variety of applications.

Applications include texting, surfing the Internet,
interfacing to Outlook, creating documents, taking pictures, and so on. The company
uses a shared order processing department.

There are $25,000 in fixed order
processing costs each month, of which $20,000 are traceable to the two divisions by
the number of orders placed. 3,000 orders a month are processed by the MP3 Player
division and 7,000 orders a month are processed by the Cell Phone division. 1,000 of
the orders processed for the Cell Phone division cannot be traced to either product
line.

Facts related to the divisions and products for the month ended September 30,
2012, follow:


Requirements

1. Calculate the rate per order for Order Processing. Calculate the traceable fixed
costs for each division and for each product in the Cell Phone division.

2. Prepare an income statement for the company using the contribution margin
approach. Calculate net income for the company, divisional segment margin for
both divisions, and product segment margin for both products.

P5-33A The records of Grade A Steak Company list the following selected accounts for the

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P5-33A Preparing a multi-step income statement and calculating gross profit
percentage [15–25 min]

The records of Grade A Steak Company list the following selected accounts for the
quarter ended April 30, 2012:
Interest revenue $800 Accounts payable $17,000
Inventory 45,100 Accounts receivable 33,500
Note payable, long–term 47,000 Accumulated depreciation 37,600
Salary payable 2,400 Angus, capital, Jan 31 53,300
Sales discounts 2,000 Angus, drawing 20,000
Sales returns and allowances 7,500 Cash 7,600
Sales revenue 296,100 Cost of goods sold 162,100
Selling expense 38,300 Equipment 130,600
Supplies 5,700 General expenses 16,300
Unearned sales revenue 13,300 Interest payable 1,200

Requirements
1. Prepare a multi-step income statement.

2. M. Davidson, manager of the company, strives to earn gross profit percentage of
at least 50% and net income percentage of 20%. Did Grade A achieve these
goals? Show your calculations

P5-31A The adjusted trial balance of Big Papi Music Company at June 30, 2012, follows:

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P5-31A Making closing entries, preparing financial statements, and computing
gross profit percentage, inventory turnover, and days in inventory [20–30 min]
The adjusted trial balance of Big Papi Music Company at June 30, 2012, follows:

BIG PAPI MUSIC COMPANY
Adjusted Trial Balance
June 30, 2012
Cash
Accounts receivable
Inventory
Supplies
Furniture
Accumulated depreciation
Accounts payable
Salary payable
Unearned sales revenue
Note payable, long–term
Papi, capital
Papi, drawing
Sales revenue
Sales returns
Cost of goods sold
Selling expense
General expense
Interest expense
Total
Account Credit
$ 8,400
13,300
1,200
6,700
15,000
36,000
180,000
$ 260,600
Debit
$ 3,600
38,800
17,200
200
40,000
40,500
5,000
82,500
19,200
12,000
1,600
$ 260,600

Requirements

1. Journalize Big Papi’s closing entries.

2. Prepare Big Papi’s single-step income statement for the year.

3. Compute the gross profit percentage, the rate of inventory turnover, and the days
in inventory for the fiscal year ending June 30, 2012. Inventory on hand one year
ago, at June 30, 2011, was $12,200.

4. For the year ended June 30, 2011, Big Papi’s gross profit percentage was 50%,
and inventory turnover was 4.9 times. Did the results for the year ended June 30,
2012, suggest improvement or deterioration in profitability over last year?

P5-27A Consider the following transactions that occurred in September 2012 for Aquamarines.

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P5-27A Journalizing purchase and sale transactions—perpetual inventory
[20–25 min]

Consider the following transactions that occurred in September 2012 for
Aquamarines.

Sep 3 Purchased inventory on terms 1/15, n/eom, $5,000.

4 Purchased inventory for cash of $1,700.

6 Returned $500 of inventory from September 4 purchase.

8 Sold goods on terms of 2/15, n/35 of $6,000 that cost $2,640.

10 Paid for goods purchased September 3.

12 Received goods from September 8 sale of $400 that cost $160.

23 Received payment from September 8 customer.

25 Sold goods to Smithsons for $1,100 that cost $400. Terms of n/30
were offered. As a courtesy to Smithsons, $75 of freight was added to
the invoice for which cash was paid directly to UPS by Aquamarines.

Requirement
1. Journalize September transactions for Aquamarines. No explanations are
required.
29 Received payment from Smithsons.

P3-44B The trial balance of Canton Air Purification System at December 31, 2012, and the data needed for the month-end adjustments follow.

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P3-44B Journalizing and posting adjustments to the T-accounts, and
preparing an adjusted trial balance [45–60 min]
The trial balance of Canton Air Purification System at December 31, 2012, and the
data needed for the month-end adjustments follow.

4 5
CANTON AIR PURIFICATION SYSTEM
Trial Balance
December 31, 2012
Cash
Accounts receivable
Prepaid rent
Supplies
Equipment
Accumulated depreciation
Accounts payable
Salary payable
Unearned service revenue
Canton, capital
Canton, drawing
Service revenue
Salary expense
Rent expense
Depreciation expense
Advertising expense
Supplies expense
Total
Account Credit
$ 3,700
3,400
2,600
39,000
15,900
$ 64,600
Debit
$ 7,200
19,400
2,200
1,600
20,000
9,600
3,300
1,300
$ 64,600
Adjustment data at December 31 follow:
Unearned service revenue still unearned, $1,800.
Prepaid rent still in force, $600.
Supplies used during the month, $400.
Depreciation for the month, $700.
Accrued advertising expense, $900. (Credit Accounts payable)
Accrued salary expense, $800.

Requirements

1. Journalize the adjusting entries.

2. The unadjusted balances have been entered for you in the general ledger
accounts. Post the adjusting entries to the ledger accounts.

3. Prepare the adjusted trial balance.

4. How will Canton Air Purification System use the adjusted trial balance?

*BE6-12 On June 30, Fabre Fabrics has the following data pertaining to the retail inventory

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*BE6-12 On June 30, Fabre Fabrics has the following data pertaining to the retail inventory
method: Goods available for sale: at cost $35,000, at retail $50,000; net sales $40,000, and ending inventory at retail $10,000. Compute the estimated cost of the ending inventory using the retail inventory method

*BE6-11 At May 31, Creole Company has net sales of $330,000 and cost of goods available for

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*BE6-11 At May 31, Creole Company has net sales of $330,000 and cost of goods available for
sale of $230,000. Compute the estimated cost of the ending inventory, assuming the gross profit
rate is 35%

BE6-9 At December 31, 2008, the following information was available for J. Graff Company:

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BE6-9 At December 31, 2008, the following information was available for J. Graff Company:
ending inventory $40,000, beginning inventory $60,000, cost of goods sold $270,000, and sales revenue $380,000. Calculate inventory turnover and days in inventory for J. Graff Company.

BE6-7 Alou Appliance Center accumulates the following cost and market data at December 31.

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BE6-7 Alou Appliance Center accumulates the following cost and market data at December 31.


Inventory Categories   Cost Data Market Data
Cameras   12,000  12,100
Camcorders   9,500  9,700
DVDs   14,000  12,800

Compute the lower-of-cost-or-market valuation for the company’s total inventory

BE6-5 The management of Hoyt Corp. is considering the effects of various inventory-costing

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BE6-5 The management of Hoyt Corp. is considering the effects of various inventory-costing
methods on its financial statements and its income tax expense.Assuming that the price the company
pays for inventory is increasing, which method will:

(a) provide the highest net income?
(b) provide the highest ending inventory?
(c) result in the lowest income tax expense?
(d) result in the most stable earnings over a number of years?

BE6-4 Data for Quirk Company are presented in BE6-3. Compute the cost of the ending inventory

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BE6-4 Data for Quirk Company are presented in BE6-3. Compute the cost of the ending inventory
under the average-cost method, assuming there are 360 units on hand.

DATA FROM BE6-3
1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8.Assuming
there are 360 units on hand, compute the cost of the ending inventory under the

BE6-3 In its first month of operations, Quirk Company made three purchases of merchandise

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BE6-3 In its first month of operations, Quirk Company made three purchases of merchandise
in the following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8.Assuming there are 360 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Quirk uses a periodic inventory system.

BE6-2 The ledger of Gomez Company includes the following items: (a) Freight-in, (b)

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BE6-2 The ledger of Gomez Company includes the following items: (a) Freight-in, (b)
Purchase Returns and Allowances, (c) Purchases, (d) Sales Discounts, (e) Purchase Discounts.
Identify which items are included in goods available for sale.

1. Which of the following items will NOT appear on the book side of the reconciliation? (Points : 1)

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1. Which of the following items will NOT appear on the book side of the reconciliation? (Points : 1)
The bank collected a note receivable of $1,000.
A nonsufficient funds check of $75 was returned to the bank.
A deposit was in transit.
The bank charged a service fee of $20.

2. The aging-of-accounts-receivable method computes uncollectible accounts expense as a percentage of net credit sales. (Points : 1)
True
False

3. In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation. (Points : 1)
True
False

4. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
$3,275
$3,075 (115000*.25)+200
$2,675
$2,875
None of these is correct

5. An accountant is under pressure to maximize the company’s net income at year-end. He is told to delay orders of important services until the following year. This action would be considered unethical because it is a misrepresentation of actual transactions. (Points : 1)
True
False

6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
$15,900
$14,900
$14,100 (15000-900)
$15,000
None of these is correct

7. A company has Net sales of $850,000, Beginning net receivables of $230,000 and Ending net receivables of $190,000. What is the days' sales in accounts receivable? (Please round to nearest whole day.) (Points : 1)
82 days
99 days
93 days
90 days (230000+190000)/2)/850000)*360
None of these is correct


.

8. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
True
False

9. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
$15,000
$14,900
$15,900
$14,100
None of these is correct

10. Which of the following is NOT one of the purposes of internal control? (Points : 1)
To encourage employees to follow company policy
To safeguard the company's assets
To ensure accurate, reliable accounting records
To guarantee that a business makes a profit

*P5-7B At the beginning of the current season on April 1, the ledger of Four Oaks Pro Shop

Price: $3.99


*P5-7B At the beginning of the current season on April 1, the ledger of Four Oaks Pro Shop
showed Cash $2,500; Merchandise Inventory $3,500; and Common Stock $6,000. These transactions
occured during April 2008.
Apr. 5 Purchased golf bags, clubs, and balls on account from Hardee Co. $2,200, FOB shipping
point, terms 2/10, n/60.
7 Paid freight on Hardee Co. purchases $80.
9 Received credit from Hardee Co. for merchandise returned $200.
10 Sold merchandise on account to members $950, terms n/30.
12 Purchased golf shoes, sweaters, and other accessories on account from Arrow
Sportswear $460, terms 1/10, n/30.
14 Paid Hardee Co. in full.
17 Received credit from Arrow Sportswear for merchandise returned $60.
20 Made sales on account to members $1,000, terms n/30.
21 Paid Arrow Sportswear in full.
27 Granted credit to members for clothing that did not fit properly $75.
30 Received payments on account from members $1,100.
The chart of accounts for the pro shop includes Cash; Accounts Receivable, Merchandise
Inventory; Accounts Payable; Common Stock; Sales; Sales Returns and Allowances; Purchases;
Purchase Returns and Allowances; Purchase Discounts, and Freight-in.

Instructions
(a) Journalize the April transactions using a periodic inventory system.

(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April
transactions.

(c) Prepare a trial balance on April 30, 2008.

(d) Prepare an income statement through gross profit, assuming merchandise inventory on hand
at April 30 is $4,524.

P5-6B Howit Inc. operates a retail operation that purchases and sells snowmobiles,

Price: $3.99


P5-6B Howit Inc. operates a retail operation that purchases and sells snowmobiles,
amongst other outdoor products.The company purchases all merchandise inventory on credit
and uses a periodic inventory system. The accounts payable account is used for recording
inventory purchases only; all other current liabilities are accrued in separate accounts. You
are provided with the following selected information for the fiscal years 2005 through 2008,
inclusive.
2005 2006 2007 2008
Income Statement Data
Sales $96,850 $ (e) $82,220
Cost of goods sold (a) 25,140 25,990
Gross profit 69,640 61,540 (i)
Operating expenses 63,500 (f) 52,060
Net income $ (b) $ 4,570 $ (j)
Balance Sheet Data
Merchandise inventory $13,000 $ (c) $14,700 $ (k)
Accounts payable 5,800 6,500 4,600 (l)
Additional Information
Purchases of merchandise
inventory on account $25,890 $ (g) $24,050
Cash payments to suppliers (d) (h) 24,650

Instructions
(a) Calculate the missing amounts.

(b) Sales declined over the 3-year fiscal period, 2006–2008. Does that mean that profitability necessarily also declined? Explain, computing the gross profit rate and the profit margin ratio
for each fiscal year to help support your answer. (Round to one decimal place.)

P5-5B At the end of Duckwall Department Store’s fiscal year on November 30, 2008, these accounts

Price: $3.99


P5-5B At the end of Duckwall Department Store’s fiscal year on November 30, 2008, these accounts
appeared in its adjusted trial balance.
Freight-in $ 5,060
Merchandise Inventory 44,360
Purchases 650,000
Purchase Discounts 7,000
Purchase Returns and Allowances 3,000
Sales 900,000
Sales Returns and Allowances 20,000

Additional facts:
1. Merchandise inventory on November 30, 2008, is $36,200.
2. Note that Duckwall Department Store uses a periodic system.

Instructions
Prepare an income statement through gross profit for the year ended November 30, 2008.

P5-4B Mike Palmer, a former professional golf star, operates Mike’s Pro Shop at Bay Golf

Price: $3.99


P5-4B Mike Palmer, a former professional golf star, operates Mike’s Pro Shop at Bay Golf
Course. At the beginning of the current season on April 1, the ledger of Mike’s Pro Shop showed
Cash $2,500, Merchandise Inventory $3,500, and Common Stock $6,000.The following transactions
were completed during April.

Apr. 5 Purchased golf bags, clubs, and balls on account from Ramos Co. $1,500, FOB shipping
point, terms 2/10, n/60.
7 Paid freight on Ramos purchase $80.
9 Received credit from Ramos Co. for merchandise returned $100.
10 Sold merchandise on account to members $1,100, terms n/30. The merchandise sold
had a cost of $810.
12 Purchased golf shoes, sweaters, and other accessories on account from Penguin
Sportswear $860, terms 1/10, n/30.
14 Paid Ramos Co. in full, less discount.
17 Received credit from Penguin Sportswear for merchandise returned $60.
20 Made sales on account to members $700, terms n/30.The cost of the merchandise sold
was $490.
21 Paid Penguin Sportswear in full, less discount.
27 Granted an allowance to members for clothing that did not fit properly $40.
30 Received payments on account from members $1,000

The chart of accounts for the pro shop includes the following: No. 101 Cash, No. 112 Accounts
Receivable,No. 120 Merchandise Inventory,No. 201 Accounts Payable,No. 311 Common Stock,
No. 401 Sales, No. 412 Sales Returns and Allowances, No. 505 Cost of Goods Sold.

Instructions
(a) Journalize the April transactions using a perpetual inventory system.
(b) Enter the beginning balances in the ledger accounts and post the April transactions. (Use J1
for the journal reference.)
(c) Prepare a trial balance on April 30, 2008.

P5-3B Huffman Department Store is located in midtown Metropolis. During the past several

Price: $3.99


P5-3B Huffman Department Store is located in midtown Metropolis. During the past several
years, net income has been declining because of suburban shopping centers. At the end of the
company’s fiscal year on November 30, 2008, the following accounts appeared in two of its trial
balances.

Unadjusted Adjusted Unadjusted Adjusted
Accounts Payable $ 47,310 $ 47,310 Interest Revenue $ 5,000 $ 5,000
Accounts Receivable 11,770 11,770 Merchandise Inventory 36,200 36,200
Accumulated Depr.—Delivery Equip. 15,680 19,680 Notes Payable 46,000 46,000
Accumulated Depr.—Store Equip. 32,300 41,800 Prepaid Insurance 13,500 4,500
Cash 8,000 8,000 Property Tax Expense 3,500
Common Stock 50,000 50,000 Property Taxes Payable 3,500
Cost of Goods Sold 633,220 633,220 Rent Expense 19,000 19,000
Delivery Expense 8,200 8,200 Retained Earnings 34,200 34,200
Delivery Equipment 57,000 57,000 Salaries Expense 120,000 120,000
Depr. Expense—Delivery Equip. 4,000 Sales 850,000 850,000
Depr. Expense—Store Equip. 9,500 Sales Commissions Expense 8,000 14,000
Dividends 12,000 12,000 Sales Commissions Payable 6,000
Insurance Expense 9,000 Sales Returns and Allowances 10,000 10,000
Interest Expense 8,000 8,000 Store Equip. 125,000 125,000
Utilities Expense 10,600 10,600

Analysis reveals the following additional data.

1. Salaries expense is 75% selling and 25% administrative.
2. Insurance expense is 50% selling and 50% administrative.
3. Rent expense, utilities expense, and property tax expense are administrative expenses.
4. Notes payable are due in 2011.
Instructions
(a) Prepare a multiple-step income statement, a retained earnings statement, and a classified
balance sheet.
(b) Journalize the adjusting entries that were made.
(c) Journalize the closing entries that are necessary.

P5-2B Newson Hardware Store completed the following merchandising transactions in the

Price: $3.99


P5-2B Newson Hardware Store completed the following merchandising transactions in the
month of May. At the beginning of May, the ledger of Newson showed Cash of $10,000 and
Common Stock of $10,000.
May 1 Purchased merchandise on account from Mesa Wholesale Supply $8,000, terms 2/10,
n/30.
2 Sold merchandise on account $4,000, terms 1/10, n/30.The cost of the merchandise sold
was $3,100.
5 Received credit from Mesa Wholesale Supply for merchandise returned $600.
9 Received collections in full, less discounts, from customers billed on sales of $4,000 on
May 2.
10 Paid Mesa Wholesale Supply in full, less discount.
11 Purchased supplies for cash $900.
12 Purchased merchandise for cash $2,700.
15 Received refund for poor quality merchandise from supplier on cash purchase $230.
17 Purchased merchandise from Sherrick Distributors $2,500, FOB shipping point, terms
2/10, n/30.
19 Paid freight on May 17 purchase $250.
24 Sold merchandise for cash $6,200.The merchandise sold had a cost of $4,600.
25 Purchased merchandise from Duffy Inc. $1,000, FOB destination, terms 2/10, n/30.
27 Paid Sherrick Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise $100. The returned merchandise
had a scrap value of $20.
31 Sold merchandise on account $1,600, terms n/30.The cost of the merchandise sold was
$1,120.
Newson Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts
Receivable,No. 120 Merchandise Inventory,No. 126 Supplies,No. 201 Accounts Payable,No. 311
Common Stock, No. 401 Sales, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts,
No. 505 Cost of Goods Sold.

Instructions

(a) Journalize the transactions using a perpetual inventory system.

(b) Enter the beginning cash and capital balances and post the transactions. (Use J1 for the journal reference.)

(c) Prepare an income statement through gross profit for the month of May 2008.

P5-1B Sorvino Book Warehouse distributes hardcover books to retail stores and extends

Price: $3.99


P5-1B Sorvino Book Warehouse distributes hardcover books to retail stores and extends
credit terms of 2/10, n/30 to all of its customers. At the end of May, Sorvino’s inventory consisted
of 240 books purchased at $1,200. During the month of June the following merchandising transactions
occurred.
June 1 Purchased 180 books on account for $5 each from Atkinson Publishers, FOB destination,
terms 2/10, n/30. The appropriate party also made a cash payment of $50 for the
freight on this date.
3 Sold 120 books on account to Readers-R-Us for $10 each.
6 Received $50 credit for 10 books returned to Atkinson Publishers.
9 Paid Atkinson Publishers in full, less discount.
15 Received payment in full from Readers-R-Us.
17 Sold 150 books on account to Bargain Books for $10 each.
20 Purchased 120 books on account for $5 each from Bookem Publishers, FOB destination,
terms 2/15, n/30. The appropriate party also made a cash payment of $50 for the
freight on this date.
24 Received payment in full from Bargain Books.
26 Paid Bookem Publishers in full, less discount.
28 Sold 110 books on account to Read-n-Weep Bookstore for $10 each.
30 Granted Read-n-Weep Bookstore $150 credit for 15 books returned costing $75.
Sorvino Book Warehouse’s chart of accounts includes the following: No. 101 Cash, No. 112
Accounts Receivable, No. 120 Merchandise Inventory, No. 201 Accounts Payable, No. 401
Sales, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods
Sold.

Instructions
Journalize the transactions for the month of June for Sorvino Book Warehouse using a perpetual
inventory system.

*P5-8A The trial balance of Terry Manning Fashion Center contained the following accounts

Price: $3.99


*P5-8A The trial balance of Terry Manning Fashion Center contained the following accounts
at November 30, the end of the company’s fiscal year.

TERRY MANNING FASHION CENTER
Trial Balance
November 30, 2008
Debit Credit
Cash $ 28,700
Accounts Receivable 30,700
Merchandise Inventory 44,700
Store Supplies 6,200
Store Equipment 85,000
Accumulated Depreciation—Store Equipment $ 22,000
Delivery Equipment 48,000
Accumulated Depreciation—Delivery Equipment 6,000
Notes Payable 51,000
Accounts Payable 48,500
Common Stock 80,000
Retained Earnings 30,000
Dividends 12,000
Sales 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400
Salaries Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Repair Expense 12,100
Delivery Expense 16,700
Rent Expense 24,000
Totals $992,700 $992,700

Adjustment data:
1. Store supplies on hand totaled $2,500.
2. Depreciation is $9,000 on the store equipment and $5,000 on the delivery equipment.
3. Interest of $4,080 is accrued on notes payable at November 30.
4. Merchandise inventory actually on hand is $44,400.
Other data:
1. Salaries expense is 70% selling and 30% administrative.
2. Rent expense and utilities expense are 80% selling and 20% administrative.
3. $30,000 of notes payable are due for payment next year.
4. Repair expense is 100% administrative.

Instructions
(a) Enter the trial balance on a worksheet, and complete the worksheet.
(b) Prepare a multiple-step income statement and a retained earnings statement for the year,
and a classified balance sheet as of November 30, 2008.
(c) Journalize the adjusting entries.
(d) Journalize the closing entries.
(e) Prepare a post-closing trial balance.

*P5-7A At the beginning of the current season, the ledger of Village Tennis Shop showed Cash

Price: $3.99


*P5-7A At the beginning of the current season, the ledger of Village Tennis Shop showed Cash
$2,500; Merchandise Inventory $1,700; and Common Stock $4,200. The following transactions
were completed during April.

Apr. 4 Purchased racquets and balls from Denton Co. $740, terms 3/10, n/30.
6 Paid freight on Denton Co. purchase $60.
8 Sold merchandise to members $900, terms n/30.
10 Received credit of $40 from Denton Co. for a damaged racquet that was returned.
11 Purchased tennis shoes from Newbee Sports for cash $300.
13 Paid Denton Co. in full.
14 Purchased tennis shirts and shorts from Venus’s Sportswear $600, terms 2/10, n/60.
15 Received cash refund of $50 from Newbee Sports for damaged merchandise that was
returned.
17 Paid freight on Venus’s Sportswear purchase $30.
18 Sold merchandise to members $1,000, terms n/30.
20 Received $500 in cash from members in settlement of their accounts.
21 Paid Venus’s Sportswear in full.
27 Granted an allowance of $30 to members for tennis clothing that did not fit properly.
30 Received cash payments on account from members $500.

The chart of accounts for the tennis shop includes Cash; Accounts Receivable; Merchandise
Inventory; Accounts Payable; Common Stock; Sales; Sales Returns and Allowances; Purchases;
Purchase Returns and Allowances; Purchase Discounts; and Freight-in.

Instructions
(a) Journalize the April transactions using a periodic inventory system.
(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April
transactions.
(c) Prepare a trial balance on April 30, 2008.
(d) Prepare an income statement through gross profit, assuming merchandise inventory on hand
at April 30 is $2,296.

ACC206 quiz A

Price: $4.99


1. If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split. (Points : 1)
True
False

2. Please refer to the following information for Peartree Company:

Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
Paid-in capital in excess of par: $2,150,000
Retained earnings: $910,000
Treasury stock: 5,000 shares purchased at $20 per share


If Peartree resold 1,000 shares of treasury stock for $24 per share, the company would record a gain on sale of treasury stock for $4,000 (Points : 1)
True
False

3. When a corporation sells 10,000 shares of $10 par value common stock for $120,000, the Common stock account is credited for $100,000. (Points : 1)
True
False

4. The account to be debited when a stock dividend is declared and distributed on the same date would be: (Points : 1)
Common stock.
Retained earnings.
Dividends.
Paid in capital in excess of par.

5. Which of the following statements is TRUE? (Points : 1)
The purchase of treasury stock decreases assets and decreases stockholders' equity.
The purchase of treasury stock increases assets and increases stockholders' equity.
The purchase of treasury stock increases assets and decreases stockholders' equity.
The purchase of treasury stock decreases assets and increases stockholders' equity.

6. A corporation must record a gain on sale for the sale of treasury stock at an amount greater than its purchase price. (Points : 1)
True
False

7. The two basic sources of equity are: (Points : 1)
common stock and bonds.
common stock and preferred stock.
paid-in capital and retained earnings.
loans from banks and gifts from donors.

8. Osbourne Company issued 50,000 shares of common stock in exchange for manufacturing equipment. The equipment was valued at $1,000,000. The stock has par value of $0.01 per share. Osbourne should record a gain on the sale of stock for the difference between the equipment’s market value and the stock’s current market value. (Points : 1)
True
False

9. On June 30, 2014, Stephans Company showed the following data on the equity section of their balance sheet:


Stockholders' equity
Common stock, $1 par 100,000 shares authorized $40,000
40,000 shares issued
Paid-in capital in excess of par 260,000
Retained earnings 940,000
Total stockholder's equity $1,240,000


On July 1, 2014, Stephans distributed a 5% stock dividend. The market value of the stock at that time was $13 per share. Following this transaction, the total shareholders’ equity would go down by $26,000. (Points : 1)
True
False

10. Which of the following is a TRUE statement about a corporation? (Points : 1)
The owners of a corporation have co-ownership of the property of the corporation.
A corporation is not taxed on the corporation's business income.
A corporation has a limited life.
The owners of a corporation have limited liability for the corporation's debts.

P5-6A Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory

Price: $ 2.50


P5-6A Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory
on credit and uses a periodic inventory system. The accounts payable account is used for
recording inventory purchases only; all other current liabilities are accrued in separate accounts.You
are provided with the following selected information for the fiscal years 2005, 2006, 2007, and 2008.

Instructions
(a) Calculate cost of goods sold for each of the 2006, 2007, and 2008 fiscal years.
(b) Calculate the gross profit for each of the 2006, 2007, and 2008 fiscal years.
(c) Calculate the ending balance of accounts payable for each of the 2006, 2007, and 2008 fiscal
years.
(d) Sales declined in fiscal 2008. Does that mean that profitability, as measured by the gross
profit rate, necessarily also declined? Explain, calculating the gross profit rate for each fiscal
year to help support your answer. (Round to one decimal place.)

P5-5A At the end of Gordman Department Store’s fiscal year on December 31, 2008, these

Price: $3.99


P5-5A At the end of Gordman Department Store’s fiscal year on December 31, 2008, these
accounts appeared in its adjusted trial balance.
Freight-in $5,600
Merchandise Inventory 40,500
Purchases 447,000
Purchase Discounts 12,000
Purchase Returns and Allowances 6,400
Sales 718,000
Sales Returns and Allowances 8,000
Additional facts:

1. Merchandise inventory on December 31, 2008, is $75,000.

2. Note that Gordman Department Store uses a periodic system.

Instructions
Prepare an income statement through gross profit for the year ended December 31, 2008.

P5-4A J. Hafner, a former professional tennis star

Price: $3.99


P5-4A J. Hafner, a former professional tennis star, operates Hafner’s Tennis Shop at the Miller Lake Resort. At the beginning of the current season, the ledger of Hafner’s Tennis Shop showed Cash $2,500, Merchandise Inventory $1,700, and Common Stock $4,200. The following transactions were completed during April.

Apr. 4 Purchased racquets and balls from Wellman Co. $840, FOB shipping point, terms 2/10, n/30.

6 Paid freight on purchase from Wellman Co. $40.

8 Sold merchandise to members $1,150, terms n/30. The merchandise sold had a cost of $790.

10 Received credit of $40 from Wellman Co. for a damaged racquet that was returned.

11 Purchased tennis shoes from Venus Sports for cash, $420.

13 Paid Wellman Co. in full.

14 Purchased tennis shirts and shorts from Serena’s Sportswear $900, FOB shipping point, terms 3/10, n/60.

15 Received cash refund of $50 from Venus Sports for damaged merchandise that was returned.

17 Paid freight on Serena’s Sportswear purchase $30.

18 Sold merchandise to members $810, terms n/30.The cost of the merchandise sold was $530.

20 Received $500 in cash from members in settlement of their accounts.

21 Paid Serena’s Sportswear in full.

27 Granted an allowance of $30 to members for tennis clothing that did not fit properly.

30 Received cash payments on account from members, $660.

The chart of accounts for the tennis shop includes the following: No. 101 Cash, No. 112 Accounts
Receivable,No. 120 Merchandise Inventory,No. 201 Accounts Payable,No. 311 Common Stock, No. 401 Sales, No. 412 Sales Returns and Allowances, No. 505 Cost of Goods Sold.

Instructions

(a) Journalize the April transactions using a perpetual inventory system.

(b) Enter the beginning balances in the ledger accounts and post the April transactions. (Use J1
for the journal reference.)

(c) Prepare a trial balance on April 30, 2008.