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Practice Chap 5

The document provides accounting information for several companies - Kerber Co., Wilkes Company, Diaz Company, Taylor Company, Tim Jarosz Company, and Rainbow Company. It includes transactions recorded by each company and instructions to prepare journal entries and financial statements. Key details include purchases and sales of merchandise on account, payment terms, freight costs, returns, discounts, inventory amounts, and income statement accounts. The document requires preparation of journal entries, adjusting entries, closing entries, and multiple-step and single-step income statements.

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HIRA KHAN L1S15MBAM0023
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426 views

Practice Chap 5

The document provides accounting information for several companies - Kerber Co., Wilkes Company, Diaz Company, Taylor Company, Tim Jarosz Company, and Rainbow Company. It includes transactions recorded by each company and instructions to prepare journal entries and financial statements. Key details include purchases and sales of merchandise on account, payment terms, freight costs, returns, discounts, inventory amounts, and income statement accounts. The document requires preparation of journal entries, adjusting entries, closing entries, and multiple-step and single-step income statements.

Uploaded by

HIRA KHAN L1S15MBAM0023
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Accounting for Merchandising Operations

Information related to Kerber Co. is presented below.


1. On April 5, purchased merchandise from Wilkes Company for $23,000, terms 2/10,
net/30, FOB shipping point.
2. On April 6, paid freight costs of $900 on merchandise purchased from Wilkes.
3. On April 7, purchased equipment on account for $26,000.
4. On April 8, returned damaged merchandise to Wilkes Company and was granted a
$3,000 credit for returned merchandise.
5. On April 15, paid the amount due to Wilkes Company in full.
Instructions:
(a) Prepare the journal entries to record these transactions on the books of Kerber Co.
under a perpetual inventory system.
(b) (b) Assume that Kerber Co. paid the balance due to Wilkes Company on May 4
instead of April 15. Prepare the journal entry to record this payment.
On June 10, Diaz Company purchased $8,000 of merchandise from Taylor Company,
FOB shipping point, terms 2/10, n/30. Diaz pays the freight costs of $400 on June 11.
Damaged goods totaling $300 are returned to Taylor for credit on June 12. The fair
value of these goods is $70. On June 19, Diaz pays Taylor Company in full, less the
purchase discount. Both companies use a perpetual inventory system.
Instructions
(a) Prepare separate entries for each transaction on the books of Diaz Company.
(b) (b) Prepare separate entries for each transaction for Taylor Company. The
merchandise purchased by Diaz on June 10 had cost Taylor $4,800.
Tim Jarosz Company had the following account balances at year-end: Cost of Goods
Sold $60,000, Inventory $15,000, Operating Expenses $29,000, Sales Revenue
$115,000, Sales Discounts $1,200, and Sales Returns and Allowances $1,700. A
physical count of inventory determines that merchandise inventory on hand is
$13,600.
Instructions
 (a) Prepare the adjusting entry necessary as a result of the physical count.
 (b) Prepare closing entries.
In its income statement for the year ended December 31, 2019, Rainbow
Company reported the following condensed data.
Operating expenses $ 825,000 Interest revenue $ 38,000
Cost of goods sold 278,000 Loss on disposal of plant assets 17,000
Interest expense 80,000 Net sales 1,200,000
Instructions
 (a) Prepare a multiple-step income statement.
 (b) Prepare a single-step income statement.
(a) ANHAD COMPANY
Income Statement
For the Year Ended December 31, 2017

Net sales $1,200,000


Cost of goods sold 278,000
Gross profit 922,000
Operating expenses 825,000
Income from operations 97,000
Other revenues and gains
Interest revenue $38,000
Other expenses and losses
Interest expense $80,000
Loss on disposal of plant
assets 17,000 97,000 59,000
Net income $ 38,000
(b) ANHAD COMPANY
Income Statement
For the Year Ended December 31, 2017

Revenues
Net sales $1,200,000
Interest revenue 38,000
Total revenues 1,238,000
Expenses
Cost of goods sold $278,000
Operating expenses 825,000
Interest expense 80,000
Loss on disposal of plant ass 17,000
Total expenses 1,200,000
Net income $ 38,000
(a) ANHAD COMPANY
Income Statement
For the Year Ended December 31, 2017

Net sales $1,400,000


Cost of goods sold 378,000
Gross profit 1,022,000
Operating expenses 925,000
Income from operations 97,000
Other revenues and gains
Interest revenue $18,000
Other expenses and losses
Interest expense $60,000
Loss on disposal of plant
assets 13,000 73,000 55,000
Net income $ 42,000
(b) ANHAD COMPANY
Income Statement
For the Year Ended December 31, 2017

Revenues
Net sales $1,400,000
Interest revenue 18,000
Total revenues 1,418,000
Expenses
Cost of goods sold $378,000
Operating expenses 925,000
Interest expense 60,000
Loss on disposal of plant ass 13,000
Total expenses 1,376,000
Net income $ 42,000
In its income statement for the year ended December 31, 2017, Anhad Company
reported the following condensed data.
Operating expenses $ 725,000 Interest revenue $ 28,000
Cost of goods sold 1,289,000 Loss on disposal of plant assets 17,000
Interest expense 70,000 Net sales 2,200,000
Instructions
 (a) Prepare a multiple-step income statement.
 (b) Prepare a single-step income statement.

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