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Aug.1) Purchased merchandise from Abilene Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

Aug.4) At Abilene's request, Stone paid $220 cash for freight charges on the August 1 purchase, reducing the amount owed to Abilene.

Aug.5)    Sold merchandise to Lux Corp. for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $2,999.

Aug.8) Purchased merchandise from Welch Corporation for $5,300 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. The invoice showed that at Stone’s request, Welch paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges.)

 Aug.9) Paid $130 cash for shipping charges related to the August 5 sale to Lux Corp.

 Aug.10) Lux returned merchandise from the August 5 sale that had cost Stone $500 and been sold for $700. The merchandise was restored to inventory.

 Aug.12) After negotiations with Welch Corporation concerning problems with the merchandise purchased on August 8, Stone received a credit memorandum from Welch granting a price reduction of $800.

 Aug.15) Received balance due from Lux Corp. for the August 5 sale less the return on August 10.

 Aug.18) Paid the amount due Welch Corporation for the August 8 purchase less the price reduction granted.

Aug.19) Sold merchandise to Trax Co. for $3,600 under credit terms of 1/10, n/30, FOB shipping point, invoice dated August 19. The merchandise had cost $2,498.

 Aug.22) Trax requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Stone sent Trax a $600 credit memorandum to resolve the issue.

 Aug.29) Received Trax's cash payment for the amount due from the August 19 sale.

 Aug.30) Paid Abilene Company the amount due from the August 1 purchase.
  
Prepare the necessary journal entries for Stone Company, which is a merchandising company that uses the perpetual system. (Hint: It will help to identify each receivable and payable; for ex, record the purchase on August 1 in Accounts Payable—Abilene.)

[The following information applies to the problems displayed below.]
BizKid Company’s adjusted trial balance on August 31, 2011, its fiscal year-end, follows.
 
                                                                    Debit                              Credit     
  Merchandise inventory         $                  32,500                    
  Other (noninventory) assets                    130,000                    
  Total liabilities                                                                              $    37,538     
  Common stock                                                                                   65,383     
  Retained earnings                                                                             43,749     
  Dividends                                                 8,000                    
  Sales                                                                                                 222,300     
  Sales discounts                                       3,401                    
  Sales returns and allowances                 14,672                    
  Cost of goods sold                                  86,585                    
  Sales salaries expense                           30,455                    
  Rent expense—Selling space                 10,448                    
  Store supplies expense                           2,668                    
  Advertising expense                              18,896                    
  Office salaries expense                          27,788                    
  Rent expense—Office space                   2,668                    
  Office supplies expense                            889

  Totals                                                    $368,970                        $ 368,970   

On August 31, 2010, merchandise inventory was $26,228. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs.                  

  Invoice cost of merchandise purchases             $    95,550 
  Purchase discounts received                                     2,007 
  Purchase returns and allowances                             4,586 
  Costs of transportation-in                                         3,900 

problem1) Compute the company’s net sales for the year.

378_net sales.jpg
problem2) Compute the company’s total cost of merchandise purchased for the year

1342_total cost.jpg
problem3) Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.

1490_income statement.jpg

problem4) Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.

499_income statement_1.jpg

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9424

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