Yuan Li Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company purchases all merchandise inventory on Problems: Set A 253

(c) Tot. trial balance

$1,367,500

(d) Net income $ 81,100 Tot. assets $ 397,000 Determine cost of goods sold and gross profit under periodic approach.

(SO 4, 5)

CaaS Gross profit $260,700 Calculate missing amounts and assess profitability.

(SO 4, 5, 6)

GEES 254 CHAPTER 5 Merchandising Operations and the Multiple-Step Income Statement credit and uses a perpetual 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 $ 6 fe) $82,220 Cost of goods sold

(a) 25,140 25,490 Gross profit 69,260 61,540 (i)

Operating expenses 63,640

(f) 52,870 Net income sy (Go) $ 4,570 $ (j)

Balance Sheet Data Merchandise inventory $13,000 $

(c) $14,700 S08, (lk)

Accounts payable 5,800 6,500 4,600 (1)

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) The vice-presidents of sales, marketing, production, and finance are discussing the company’s results with the CEO. They note that 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.

Journalize, post, and prepare *P5-9A At the beginning of the current season on April 1, the ledger of Fairway Pro Shop trial balance and partial showed Cash $2,500; Merchandise Inventory $3,500; and Common Stock $6,000. These BOCOME SECLCINENY USUTS transactions occured during April 2007.

periodic approach.

(SO 5; 7)

Apr. 5 Purchased golf bags, clubs, and balls on account from Kokott Co. $1,800,

[GLS| terms 3/10, n/60.

7 Paid freight on Kokott Co. purchases $80.

9 Received credit from Kokott Co. for merchandise returned $200.

10 Sold merchandise on account to members $910, terms n/30.

12 Purchased golf shoes, sweaters, and other accessories on account from Eagle Sportswear $730, terms 1/10, n/30.

14 Paid Kokott Co. in full. 17. Received credit from Eagle Sportswear for merchandise returned $30.

20 Made sales on account to members $840, terms n/30.

21 Paid Eagle Sportswear in full.

27 Granted credit to members for clothing that did not fit properly $60.

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) Tot. trial

(c) Prepare a trial balance on April 30, 2007.

balance $8,035

(d) Prepare an income statement through Gross Profit, assuming merchandise inventory Gross profit $ 520 on hand at April 30 is $4,655.