1. Fill in the blanks in the income statement below Sales Cost of goods sold Merchandise inventory, beginning Total cost of merchandise purchases Merchandise inventory, ending Cost of goods sold Gross profit Expenses Net income (loss) $86,000 9,000 40,000 (a) 24,200 (b) 20,000 (c) 2. Prepare journal entries to record the following transactions of Recycled Fashion retail store. Recycled Fashion uses a perpetual inventory system and the gross method. Mar 3 Mar 4 Purchased $1,150 of merchandise from GreenWorld Company with credit terms of 2/15, n/60, invoice dated March 3, and FOB shipping point. Paid $75 cash for shipping charges on the March 3 purchase. Mar 5 Mar 18 Mar 19 Mar 21 Mar 29 Returned to GreenWorld unacceptable merchandise that had an invoice price of $150. Paid GreenWorld for the March 3 purchase, net of the discount and the returned merchandise. Purchased $425 of merchandise from PeopleFirst Corporation with credit terms of 1/10, n/30, invoice dated March 19, and FOB destination After negotiations, received from PeopleFirst a $25 allowance (for scuffed merchandise) toward the $425 owed on the March 19 purchase. Sent check to PeopleFirst paying for the March 19 purchase, net of the allowance and the discount. Date Mar 3 Mar 4 Mar 5 Mar 18 General Journal Debit Credit 1 3. A company uses perpetual inventory system, records purchases using the gross method, and recorded the following entry. Assume that this was the only inventory-related entry except for the initial entry to record a credit purchase of inventory for a period. Account Title Accounts Payable Merchandise Inventory Cash Debit 3,000 Credit 90 2,910 This entry reflects a: A. Payment of the accounts payable less a 1% discount taken B. Return of merchandise C. Sale of merchandise on credit D. Payment of the accounts payable less a 3% cash discount taken E. None of the above 4. Prepare journal entries to record the following transactions for Allied assuming it uses a perpetual inventory system and the gross method. Aug 3 Aug 5 Aug 7 Aug 8 Aug 15 Allied made its first and only purchase of inventory for the period on Aug 3 for 2,000 units at a price of $10 cash per unit (for a total cost of $20,000) Allied sold 1,500 of the units in inventory for $14 per unit (invoice total: $21,000) to Macy Company under credit terms 2/10, n/60. The goods cost Allied $15,000. Macy returns 125 units because they did not fit the customer's needs (invoice amount: $1,750). Allied restores the units, which cost $1,250, to its inventory. Macy discovers that 200 units are scuffed but are still of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 to compensate for the damage. Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount. ACT 201 Date Aug 3 Aug 5 Aug 5 Aug 7 Aug 7 Aug 8 Aug 15 Ch 5. Accounting for Merchandising Operations General Journal handout Debit Credit 5. Telo Company's ledger on July 31, its fiscal year-end, shows merchandise inventory of $37,800 before accounting for any shrinkage. A physical count of its July 31 year-end inventory discloses that the cost of the merchandise inventory still available is $35,900. Prepare the entry to record any inventory shrinkage. Date July 31 General Journal Debit Credit ACT 201 Ch 5. Accounting for Merchandising Operations handout 6. The following list includes temporary accounts from the December 31 adjusted trial balance of Emiko Company. Use these normal account balances to journalize closing entries. K. Emiko, Withdrawals Sales Sales returns and allowances Sales discounts Cost of goods sold Selling, general, and administrative expenses Date Dec 31 Dec 31 Dec 31 Dec 31 General Journal Debit Credit $33,000 $529,000 17.500 5,000 213.300 208,700 Debit Credit 7. Lugar Company reports the following income statement accounts for the year ended June 30. Prepare a multiple-step income statement. Sales discounts $750 Office supplies expense 500 Office salaries expense 2,000 Cost of goods sold 9,000 Rent expense-Office space 1,500 Sales 20,000 Advertising expense 500 Insurance expense 1,000 Sales returns and allowances 250 Sales staff salaries 2,500 ACT 201 Sales Less: Less: Net sales Cost of goods sold Gross profit Expenses Selling expenses Ch 5. Accounting for Merchandising Operations Lugar Company Income Statement For Year Ended June 30 Total selling expenses G&A expenses Total G&A expenses Total expenses Net income handout 8. The following information on current assets and current liabilities is for Ashford Company. Compute Ashford's acid-test ratio (Round your answer to 2 decimal places). Cash Accounts receivable Inventory $2,400 9,300 Prepaid expenses 300 Accounts payable 9,100 5,000 Other current liabilities 4,800 ACT 201 handout Ch 5. Accounting for Merchandising Operations 9. The following information on sales and cost of goods sold is for Tyler Company. Compute Tyler's gross margin ratio (Round your answer to 2 decimal places). Sales $220,000 Sales discounts 6,000 Sales returns and allowances 24,000 Cost of goods sold 110,000 10. A company purchased $5,000 worth of merchandise. Transportation costs for the buyer were an additional $300. The company returned $400 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is: Invoice cost of purchase Less: purchase R&A Less: purchase discounts Add: Freight-in costs (if paid by the buyer) Total net cost of purchase