E5-2 only

E5-1 Mr. Lucas has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually the same as for a service company. 2. For a merchandiser, sales less operating expenses is called gross profit. Answer general questions about merchandisers (SO 1) For a merchandiser, the primary source of revenues is the sale of inventory. 4 Sales salaries and wages is an example of an operating expense s. The operating cycle of a merchandiser is the same as that of a service company. 6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained. 7. In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting period. 8. A periodic inventory system provides better control over inventories than a perpetual system. Instructions Identify each statement as true or false. If false, indicate how to correct the statement. ES-2) Information related to Almond Co. is presented below. 1. On April 5, purchased merchandise from Morris Company for $23,000, terms 2/10, net/30, Journalize purchases transactions FOB shipping point. 2. On April 6, paid freight costs of $900 on merchandise purchased from Morris. 3. On April 7, purchased equipment on account for $26,000. 4. On April 8, returned damaged merchandise to Morris Company and was granted a $3,000 (SO 2) credit for returned merchandise. 5. On April 15, paid the amount due to Morris Company in full. Instructions (a) Prepare the journal entries to record these transactions on the books of Almond Co. under a perpetual inventory system. (b) Assume that Almond Co. paid the balance due to Morris Company on May 4 instead of Apri 15. Prepare the journal entry to record this payment