Handout 5: Accounting for merchandising operations Exercise 1: 1. In May 7 Ali Co. purchase goods FOB shipping point from Ahmed Co, for $5000 on account under credit terms 2/10, n/30, 2. in May 7, Ali Co. paid cash $150 as freight expenses FOB shipping point 3. May 12 Ali Co. returns goods purchased in May 7 to Ahmed Co. for $300 4. in May 15, Ali Co. paid the balance due within the discount period Instructions: Prepare Journal entries assuming periodic inventory system. Purchase transactions: 1- Purchases General Journal Account Title & Explanation Ref. Debit Credit Date May 7 2- Freight expenses Example: in May 7, Ali Co. paid cash $150 as freight expenses FOB shipping point General Journal Date Account Title & Explanation Ref. Debit Credit May 7 3- Purchase Return and allowances General Journal Date Account Title & Explanation May 12 Ref. Debit Credit 4- Purchase Discount General Journal Account Title & Explanation Ref. Debit Credit Date 15/5 Sales transaction Example: 1 - in May 16, Ali Co. sold goods 40 unit at selling price 100$ per unit to Sami Co. on account 2/10 n.30. FOB destination. 2- in May 16 Ali Co. paid cash 350$ freight out expenses 3. In May 17, Ali Co received 5 units returned goods from Sami Co (5 unit 100) of $500), so he issued credit memo-to Sami co. 4. On May 20 Ali received the balance due from Sami Co 1- sales the amount of sales 40 unit selling price 100$-$4000 in May 16, Ali Co. sold goods $4000 to Sami Co. on account 2/10 n,30. General Journal Date Account Title & Explanation Ref. Debit May 16 Credit 2- Freight-out expense (FOB destination) Date Account Title & Explanation 16/5 Ref. Debit Credit 3- Sales Return and Allowances General Journal Account Title & Explanation Date May 17 Ref. Debit Credit N 4- Sales Discount and Cash collection General Journal Account Title & Explanation Date May 20 Ref. Debit Credit Exercise 2: On September 1, Snow Supply had an inventory of 15 backpacks at a cost of $25 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred. Assuming a periodic inventory system. Sept. 4 Purchased 50 backpacks at $25 each from Jenks, terms 2/10, 1/30. Sept. 6 Received credit of $150 for the return of 6 backpacks purchased on Sept. 4 that were defective. Sept. 9 Sold 30 backpacks for $35 each to McGill Books, terms 2/10, 1/30. Sept. 13 Sold 15 backpacks for $35 each to Calvin Office Supply, terms n/30. Sept. 14 Paid Jenks in full, less discount. Instructions: Journalize the September transactions for Snow Supply. General Journal __ __ Date Account Title & Explanation Ref. Debit May 20 ___ Credit Exercise 3: 1 -Prepare the necessary journal entries on the books of Tri-State Carpet Company to record the following transactions, assuming a periodic inventory system (you may omit explanations): (A) Tri-State purchased $40,000 of merchandise on account, terms 2/10, 1/30. (b) Returned $4,000 of damaged merchandise for credit. (c) Paid for the merchandise purchased within 10 days. Exercise 4: Copple Hardware Store completed the following merchandise transactions in the month of May, Copple using periodic inventory system. May 1 Purchase 300 PCs on account $1200 each from Sameer Trading terms 2/10, n/30. 2 Received credit note $2400 for PCs purchased on May 1. 3 Sold 25 PCs on account $1500 to Smart System, terms 1/10, n/30. 7 Purchase office equipment on account $4500 from H. R. Co. 8 Received Collections in full from Smart System. 9 Paid Sameer Trading the balance due. 10 Sold 15 PCs on account $1500 each to Net Soft Co. terms 1/10, n/30. 13 Granted credit note to Net Soft Co. for 1 PC returned $1500. 18 Received collections in full from Net Soft. 25 Paid H. R. Co. in full. Instructions: Journalize the September transactions for Copple Hardware Store