Credit Terms & Inventory Accounting Davenport Docking uses the net method of accounting for purchases and sales. The net method assumes that discounts are taken when a purchase or sale of inventory is made on account. Discounts are applied at the time a purchase or sale of inventory is made. PURCHASE DISCOUNT TERMS: When Davenport Docking purchases merchandise inventory from a supplier or vendor on account, they receive credit terms of 2/20, net 30. Do NOT round intermediate calculations. If required round final number to nearest cent. SALE DISCOUNT TERMS: When Davenport Docking sells merchandise to a customer on account, they offer that customer credit terms of 2/30, net 45. Do NOT round intermediate calculations. If required round final number to nearest cent. Davenport Docking uses a perpetual inventory accounting system and a first-in, first-out (FIFO) inventory costing method. Within this workbook there is a worksheet labeled "Inventory Control". You will need to update this worksheet EVERYTIME a purchase or sale of INVENTORY is made. As part of that process you will be calculating the value of COGS each time you generate a sale of Inventory. Use the "Inventory Control" worksheet to calcluate your COGS values. Chart of Accounts - Accounts Receivable Ledger Account Name June Balances Four Winns Chris Craft Sea Ray Boston Whaler Donzi $ 7,000.00 $ 86,350.00 $ 65,000.00 $ 92,500.00 $ 300,000.00 Chart of Accounts - Accounts Payable Ledger Raydar Marine Acme Scotty DU Utility Company Staples Account Name June Balances $ 25,000.00 $ 362,500.00 $ 104,000.00 $ 3,300.00 $ 500.00 JULY JOURNAL TRANSACTIONS 1-Jul Purchased 5,000 Fish Finder units on Credit from Raydar Marine for $42.00 per unit. 1-Jul Issued 10,000 shares of common stock for $20 per share (Refer to the Chart of Accounts for description of common stock - including # of shares outstanding). 1-Jul Signed a one-year 15%, $216,000 note payable with Boat US Bank. 1-Jul Sold 4,000 Propellers on account to Chris Craft for $85 per units, Invoice #5555. 2-Jul Rented part of the warehouse to a new tenant and received $18,000 for three months rent (July, August, September). 2-Jul Sold 5,200 Fish Finder units on account to Sea Ray for $82 per unit, Invoice #5556. 2-Jul Purchased office supplies from Staples on credit for $4,800. There is NO purchase discount on this transaction as it is not an inventory item. END OF GENERAL JOURNAL PAGE 1. THE ENTRIES AFTER THIS MUST GO ON GENERAL JOURNAL PAGE 2 2-Jul Sold 900 Downriggers for $66 per unit and 800 propeller units for $86 per unit on account to Boston Whaler, Invoice #5560. 3-Jul The Board of Directors declared a cash dividend of $2 per share for shareholders of record on July 5th, payable on July 12th. Refer to the chart of accounts for # of outstanding shares. Please include ALL outstanding shares as of July 5th. 5-Jul Received payment from Chris Craft for June 20th sale. Refer to AR ledger for amount. 5-Jul A bankruptcy judge disallowed Davenport Docking's claim for $7,000 due from Four Winns. Management decided to write off this accounts receivable. 5-Jul Paid $3,300 to DU Utility Co. to settle amount owed for a utilities bill that was recorded in June as an Account Payable, Check #5278. 5-Jul Paid $3,300 to DU Utility Co. to settle amount owed for a utilities bill that was recorded in June as an Account Payable, Check #5278. 6-Jul Purchased 8,000 shares of Grand Valley Marine, Inc. stock for $15 per share. The investment is intended to be held for less then 1 year. 6-Jul Received and paid expense reports for travel and entertainment totaling $5,925, Check #5279. 8-Jul Paid for office supplies purchased on July 2nd, Check #5280. END OF PAGE 2. THE ENTRIES AFTER THIS MUST GO ON PAGE 3 11-Jul Paid in full for the July 1st purchase from Raydar Marine, Check #5281. 11-Jul Received a bill from the law firm Bob Loblaw for $18,900, payable upon receipt, for bond consulting fees, paid the bill immediately-no payable recognized. Issued Check #5282. 12-Jul Paid the dividend that was declared on July 3rd, Check #5283. 13-Jul Took advantage of a trade discount of 20% on the purchase of 3,100 Propellers on account from Acme. Before applying trade discount the propellers are selling for $50 per unit. (Trade discount taken on total BEFORE purchase discount). 13-Jul Purchased 1,850 Fish Finder units on credit from Raydar Marine for $50 per unit. 15-Jul Sold 2,500 Propellers on credit to Donzi for $99.00 per unit, Invoice 5557. 15-Jul Check # 5284 was issued for payroll: $25,800 for salaried and $10,550 for wages. 15-Jul Purchased 2,500 Downriggers on credit from Scotty for $32 per unit. END OF PAGE 3. THE ENTRIES AFTER THIS MUST GO ON PAGE 4 17-Jul Issued a credit to Sea Ray for the return of 350 defective fish finder units from the July 2nd sale. These units has a cost basis of $41.16 per unit. DO NOT RECORD IN INVENTORY CONTROL WORKSHEET. 17-Jul Issued a credit to Sea Ray for the return of 350 defective fish finder units from the July 2nd sale. These units has a cost basis of $41.16 per unit. DO NOT RECORD IN INVENTORY CONTROL WORKSHEET. 17-Jul Returned the 350 defective units received from Sea Ray to Raydar Marine. Raydar Marine issued a cash refund. DO NOT RECORD IN INVENTORY CONTROL WORKSHEET. 18-Jul Received payment in full from Chris Craft for the July 1st sale. 20-Jul While inspecting the July 13th purchase, it was discovered that the Fish Finder units were programmed for South America instead of North America. Davenport Docking returned the entire order to Raydar Marine. This is input as a negative adjustment in the purchases columns on the inventory control tab. 20-Jul Davenport Docking purchased 2,800 shares of its own stock for $10 per share. 22-Jul Sold 2,650 Downriggers on credit to Sea Ray for $56 per unit, Invoice #5559. 23-Jul Paid $195,000 of the $362,500 owed to Acme from June 25th, Check #5285. END OF PAGE 4. THE ENTRIES AFTER THIS MUST GO ON PAGE 5 23-Jul Received payment from Donzi for $175,000 of the $300,000 owed from June. 24-Jul Purchased a $3,000 international phone card for one of the sales representative's upcoming European business trip, Check #5286. 25-Jul Paid in full for the purchase from Acme on July 13, Check #5287 26-Jul Purchased 1,250 Downriggers from Scotty for $33 per unit paying in cash, Check #5288 27-Jul Sold 1,500 Downriggers on credit to Donzi for $61 per unit, Invoice 5558. 27-Jul Hired and paid a consultant $50,000 to devise a marketing plan. Davenport Docking's management felt this was necessary to develop brand awareness. Check #5289. 27-Jul Hired and paid a consultant $50,000 to devise a marketing plan. Davenport Docking's management felt this was necessary to develop brand awareness. Check #5289. 28-Jul Davenport Docking is behind in its mortgage payments to LMCU. Paid a total of $20,000 ($4,000 principal and $16,000 interest), Check #5290. 28-Jul Sold 1,000 treasury shares from July 20th transaction for $15 per share END OF PAGE 5. THE ENTRIES AFTER THIS MUST GO ON PAGE 6 29-Jul Received payment in full from Donzi for the July 27th transaction. 29-Jul Sold 3,000 shares of Grand Valley Marine, Inc stock for $18 per share. 29-Jul Check #5292 was issued for payroll: $25,800 for salaries and $11,950 for wages. 30-Jul Paid the first month's principal payment of $18,000 on the note payable from July 1 Boat US bank. In addition, paid one month's interest (interest calculated BEFORE principal payment each month), Check # 5293 30-Jul Issued bonds payable at 97 discount. Face value of the bonds is $400,000. Contract rate on bond is 8% and bond matures in 5 years. Fish Finders Purchases Purch Purch Date Units $/Unit Purch $ Sale Units (CGS) Beg. Bal. 1-Jul 5000 $ 41.16 $ 205,800.00 Propellers Sales Sale $/Unit (CGS) Ending Inventory (EI) Sale $ (CGS) El Units 500 El $/Unit EI $ $ 40.00 $20,000.00 Purchases Purch Purch Date Beg. Bal. Units $/Unit Purch $ Sale Units (CGS) Sales Sale $/Unit (CGS) Sale $ (CGS) El Units 5200 1-Jul Ending Inventory (El) El $/Unit EI $ $ 55.00 $286,000.00 Downriggers Purchases Purch Purch Date Units $/Unit Beg. Bal. Sale Units Sales Sale $/Unit Ending Inventory (EI) Purch $ (CGS) (CGS) Sale $ (CGS) El Units 1400 El $/Unit EI $ $ 40.00 $ 56,000.00