Merchandise Accounting
SOLUTION - Cost of sales 1 Calculate Cost of Sales - Periodic Inventory System From the below accounts balances, prepare the cost of sales Transportation in $ 853 Purchase allowanceretuns $ 4,653 Sales commission $ 3,114 Purchases $ 81,269 Transportation out $ 3,894 Purchases discount $ 4,117 Ending inventory $ 10,723 Goods in transit, with company shippers $ 1,855 Beginning inventory $ 10,116 Transit insurance for purchases, FOB shipping point $ 877 not included in ending inventory figure above. 2 Closing period inventory update une Under the perpetual inventory system, the inventory balance is updated after every movement in or out in the form of purchases, purchases returns allowances, purchases discount, or after a sale or sales returns. It does not use temporary accounts, and does not wait till the period end to compile the cost of sales. Therefore, the balance in inventory account in the adjusted trial balance is assumed correct. However, even for this system, there are benefits for an end of period physical count For any of two reasons, this book figure may not be accurate to proceed to the next steps or period a) The physical count may reveal shortages or surpluses (shrinkage or over account that needs updating to give the accurate account balance. b) Though the inventory count is believed accurate, the policy in valuing closing inventory is to use the lower of cost or market value. Example: Pepys Sports Shop retails sporting gear. It took physical count of the items of inventory on 6/30/2021. The count revealed the below units. The cost records show the unit costs as stated. You are required to adjust the closing inventory, if necessary, using the total cost approach Item Quantity Book Cost Market cost Total book value Lower of Cost or Market Cleats Pair 35 $ 31 S 35 Hose Pair 56 S Football Each 15 Shirts Each 82 15 S 17 Body pads Each 38 $ 115 Helmets Each 25 $ 6 S 15 S 9 14 $ $ 10 15 18$ Adjustment Journal Accounts Date DE CE 3 Using the below balances from an adjusted trial balance, prepare the multi-step income statement in proper form. INCOME STATEMENT Multi-step Version ACCOUNT Balance Gross sales $ 44,207 Sales allowance and returns $ 1,632 Sales discount $ 1,077 Cost of sales $ 18,337 Telephone internet expenses $ 185 Transit insurance for sales deliveries $ 134 Depreciation of buildings $ 4,125 Advertising expenses $ 235 Sales commission $ 740 Warehous rent expenses $ 1,800 Office Rent expenses $ 1,500 ** Heat and light expenses $ 882 Wages/salaries expenses $ 7,529 ** Vehicle maintenance expenses $ 721 Freight out S 154 Warehouse security expense $ 360 Inventory shrinkage $ 144 Cleaning expenses $ 1,500 Flood disaster fund contribution to City $ 4,500 Dividend received from investments $ 10,000 Supplies expenses $ 856 The highlighted cost are joint, and should be apportioned as follows. Selling Administration Distribution 50% 50% 70% 30% Use this same sheet to do the work, and email the solutions to me or send through Canvas 1 Calculate Cost of Sales - Periodic Inventory System SOLUTION - Cost of sales From the below accounts balances, prepare the cost of sales. Transportation in $ 853 Purchase allowance returns $ 4,653 Sales commission $ 3,114 Purchases $ 81,269 Transportation out $ 3,894 Purchases discount $ 4,117 Ending inventory $ 10,723 Goods in transit, with company shippers $ 1,855 Beginning inventory S 10,116 Transit insurance for purchases, FOB shipping point $ 877 not included in ending inventory figure above. 3 Using the below balances from an adjusted trial balance, prepare the multi-step income statement in proper form INCOME STATEMENT Multi-step Version ACCOUNT Balance Gross sales $ 44,207 Sales allowance and returns $ 1.632 Sales discount $ 1,077 Cost of sales $ 18,337 Telephone/internet expenses S 185 Transit insurance for sales deliveries S 134 Depreciation of buildings 4,125 Advertising expenses $ 235 Sales commission $ 740 Warehous rent expenses 1,800 Office Rent expenses S 1,500 ** Heat and light expenses $ 882 Wages/salaries expenses $ 7,529 ** Vehicle maintenance expenses $ 721 Freight out S 154 Warehouse security expense S 360 ** Inventory shrinkage S 144 ** Cleaning expenses $ 1,500 Flood disaster find contribution to City S 4,500 Dividend received from investments $ 10,000 ** Supplies expenses $ 856 + The highlighted cost are joint, and should be apportioned as follows. Selling Administration Distribution 50% 50% 70% 30%
