Problem 3Transactions for a Merchandising Entity (File: MERCH TRANS)

Learning Objectives

Record purchasing transactions for a merchandising firm in t-accounts.

Record sales transactions for a merchandising firm in t-accounts.

Foot T-Accounts. Transfer amounts to a Trial Balance.

Prepare a Schedule of Accounts Receivable.

Prepare a Schedule of Accounts Payable.

Compute Net Sales.

Compute Net Delivered Cost of Purchases.

Prepare components of anIncome Statement for a merchandising entity using proper format.

Create a Chart.

Problem Data William Evans began Evans Distributors, a sporting goods distribution company, in January 2016, and engaged in the transactions below. Assume Evans Distributors and its customers take advantage of all cash discounts. The company uses a periodic inventory system. (This is the type of system covered in ACCT 100.) This means that the company records purchases of merchandise to an account called Purchases, and sales of merchandise to an account called Sales. The Merchandise Inventory account is NOT TOUCHED until the end of the fiscal year, when a physical inventory account is taken. Transactions for the company appear below. DATE TRANSACTIONS 2016 Jan. 1 2 3 4 5 10 11 13 15 15 15 16 17 William Evans started Evans Distributors with an investment of 549,000. He also invested personal business supplies worth $1,000 Purchased merchandise for cash, $10,500, Check 100. Sold merchandise on account to Chu Corporation, $750, terms 2/10, 1/30, Invoice 1001. Purchased merchandise on account from Whitson Company, S1,800, terms 1/10,n/30, Invoice 1125 Received and paid freight charges related to January 4 purchase of merchandise from Whiton Company, S100, Check 101 Chu Corporation returned merchandise purchased on January 2, issued credit memo #101 for $100. Received payment in full from Chu Corporation. Paid amount due to Whitson Company for purchase of January 4, Check 102. Recorded cash sales for the two-week period ended Jan. 15 of $5,750. Recorded sales on credit cards for the two-week period ended Jan. 15, $1,200, the bank charges a 3% fee on all credit card sales. Paid wages, S1,400, Check 103. Purchased equipment (not for resale), 51,750, Check 104. Paid freight for delivery of equipment purchased on January 16, $250, Check 105. (Note: freight charges for purchase of equipment should be debited to the Equipment account.) Purchased merchandise on account from Terri Manufacturing for S4,500, subject to trade dis- count of 40% terms 1/10, 1/30, Invoice 2078. Sold merchandise on account to Moloney Corp, $2,500, terms 1/10, 1/30, Invoice 1002. Purchased merchandise on account from Schmidt Company, $3,000, terms 1/10, 1/30, Invoice 3204; freight prepaid by Schmidt Company and added to invoke, $70. (Total invoice amount, $3,070). Paid amount owed to Terri Manufacturing for purchase of January 18, Check 106. Received amount due from Moloney Corp. for the sale of January 20. Paid amount due to Schmidt Company for purchase of January 21, Check 107. Recorded cash sales for the period from January 1631, 56,200. Recorded sales on the credit cards for the period from January 1631, $2,200, the bank charges a 3% fee on all credit card sales. 18 20 21 27 29 30 31 31 During the month end review, there were three additional transactions that need to be recorded as follows. All three transactions were dated 1/31/2016: An unrecorded sale was discovered during the review process. The sale was made to Tsang's Distributors on 1/31/2016 in the amount of $3,200. Terms of sale were 1/10 n 30 and the invoice number was 1003. An invoice came in the mail late on 1/31/2016 for goods that we had purchased that were in transit via FOB shipping point from Schmidt Company. The controller determined the goods were the property of Evans Distributors as of 1/31/2016 and need to be recorded. Invoice # 3210 in the amount of $4,200 plus freight that was prepaid and added to the invoice in the amount of $150. (Total invoice was for $4,350.) Same terms as previous purchases. The owner, William Evans, took a drawing from the firm on 1/31/2016 prior to the close of business on check # 108 in the amount of $8,000. Requirements: 1. Open up the file called MERCH TRANS. 2. Record all transactions in the appropriate merchandising t-accounts. Make sure you show the dates for ALL TRANSACTIONS. The first one has been done for you as an example. 3. For any accounts that affect Accounts Receivable or Accounts Payable, update the subsidiary ledgers as appropriate. Record terms of payment and any relevant document numbers in the subsidiary ledger. 4. When you have completed recording all transactions, insure that you balance with the check figures as follows: a. Cash total is $37,865. b. The trial balance totals after all transactions have been recorded is $76,225. 5. Save your work as MERCH TRANSS. I will be reviewing the following printouts on the one downloaded file that you submit: a. T Accounts with Trial Balance. (Landscape: Fit to one page.) b. Formulas using Control. (Create a new tab called "Formulas." Copy your work over to the new tab. Use Control Tilde to show your formulas. Widen the columns if necessary so I can see complete formulas.) C. The subsidiary ledgers and schedules of accounts receivable and accounts payable. (Landscape: Fit to one page.) d. Formulas of the Subsidiary ledgers and Schedules. (Create a new tab called "Formulas Ledgers." Copy your work over to the new tab. Use Control Tilde to show your formulas. Widen the columns if necessary so I can see complete formulas.) 6. Analysis of Info: Create a new "tab" or worksheet within the same workbook or file. Call the new worksheet "Analysis" Assuming that ending inventory for the month ended 1/31/2016 was $5,000, compute the following IN PROPER FORM on the "Analysis" Worksheet: (Hint: In good form means show all computations, label each item, and use proper format including single lines, double lines, etc.) a. Net Sales b. Net Delivered Cost of Purchases C. Cost of Goods Sold d. Gross Profit and Gross Profit % e. Net Income and Net Income or Net Profit % Save the file as MERCH TRANS6. Set up the analysis to fit to one or two pages. 7. Chart: Set up a new tab in your most recent workbook called "Chart." Create a pie chart showing the percentage breakdown of TOTAL ASSETS. Consider setting up a chart data table and pull the information directly from the trial balance using cell references. Make sure your chart contains an appropriate 3-line title. (Who What When). Consider reviewing the lesson on charts if you have forgotten how to prepare a chart. Save your file as MERCH TRANS7