CH 05
CH 05
Chapter 5
Accounting for Merchandise
Operations
Chapter Outline
Learning Objectives
LO 1 Describe merchandising operations and inventory
systems.
LO 2 Record purchases under a perpetual inventory system.
LO 3 Record sales under a perpetual inventory system.
LO 4 Apply the steps in the accounting cycle to a
merchandising company.
LO 5 Prepare financial statements for a merchandising
company.
Wholesaler Consumer
INVENTORY
OB
Purchase Cost of goods sold
Ending Balance
1/10 EOM
1% discount if paid within first 10 days of next month.
n/10 EOM
Net amount due within the first 10 days of the next
month.
Copyright ©2019 John Wiley & Sons, Inc. 22
Purchase Discounts (3 of 5)
Illustration: Assume Sauk Stereo pays the balance due of
€3,500 (gross invoice price of €3,800 less purchase returns
and allowances of €300) on May 14, the last day of the
discount period. Prepare the journal entry Sauk Stereo makes
on May 14 to record the payment.
May 14 Accounts Payable 3,500
Inventory 70
Cash 3,430
(Discount = €3,500 × 2% = €70)
May 8 Inventory 50
Cost of Goods Sold 50
Net Sales
€3,430
Copyright ©2019 John Wiley & Son, Inc. 35
Sales Discounts (2 of 2)
Illustration: Assume Sauk Stereo pays the balance due of
€3,500 (gross invoice price of €3,800 less purchase returns
and allowances of €300) on May 14, the last day of the
discount period. Prepare the journal entry PW Audio Supply
makes to record the receipt on May 14.
Sales
Sales revenue €480,000
Less: Sales returns and allowances €12,000
Sales discounts 8,000 20,000
Net sales €460,000
Net income
Other comprehensive income €21,500
Unrealized holding gain on investment securities (net of €400 tax) 2,300
Comprehensive income €23,800