1. Prepare the journal entries to record the following transactions on Horst Company's books using a perpetual inventory system.
(a) On March 2, Horst Company sold $800,000 of merchandise to Bernadina Company, terms 2/10, n/30. The cost of the merchandise sold was $540,000.
(b) On March 6, Bernadina Company returned $140,000 of the merchandise purchased on March 2. The cost of the merchandise returned was $94,000.
(c) On March 12, Horst Company received the balance due from Bernadina Company.
2. From the information above, prepare the journal entries to record these transactions on Bernadina Company's books under a perpetual inventory system.
3. Assume that Tracy Company uses a periodic inventory system and has these account balances: Purchases $404,000; Purchase Returns and Allowances $13,000; Purchase Discounts $9,000; and Freight-In $16,000. Determine net purchases and cost of goods purchased.
4. Durbin Corporation reported net sales of $250,000, cost of goods sold of $150,000, operating expenses of $50,000, net income of $32,500, beginning total assets of $520,000, and ending total assets of $600,000. Calculate each of the following values and explain what they mean: (a) profit margin and (b) gross profit rate.
5. The following information is available for Vogt Corp. for the year ended
December 31, 2014:
Other revenues and gains $ 12,700 Sales revenue $592,000
Other expenses and losses 13,300 Operating expenses 186,000
Cost of goods sold 156,000 Sales returns and
allowances 40,000
Prepare a multiple-step income statement for Vogt Corp. The company has a tax rate of 30%.
6. Presented below is information for Zhou Co. for the month of January 2014.
Cost of goods sold $212,000 Rent expense $ 32,000
Freight-out 7,000 Sales discounts 8,000
Insurance expense 12,000 Sales returns and allowances 20,000
Salaries and wages expense 60,000 Sales revenue 370,000
Instructions
(a) Prepare an income statement using the format presented on page 245. Assume a 25% tax rate.
(b) Calculate the profit margin and the gross profit rate