Transactions

Inventory Control

Adjusting Entries

Credit Terms & Inventory Accounting Panther Pacific 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 Panther Pacific 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 Panther Pacific 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. Panther Pacific uses a perpetual inventory accounting system and a last-in, first-out (LIFO) 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. AUGUST JOURNAL TRANSACTIONS 1-Aug Purchased 5,000 Fish Finder units on Credit from Raydar Marine for $42.00 per unit. 1-Aug 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-Aug Signed a one-year 15%, $216,000 note payable with Boat US Bank. 1-Aug Sold 4,000 Propellers on account to Chris Craft for $85 per units, Invoice #5555. 2-Aug Actober). Rented part of the warehouse to a new tenant and received $18,000 for three months rent (August, September, 2-Aug Sold 5,200 Fish Finder units on account to Sea Ray for $82 per unit, Invoice #5556. 2-Aug 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-Aug Sold 900 Downriggers for $66 per unit and 800 propeller units for $86 per unit on account to Boston Whaler, Invoice #5560. 3-Aug The Board of Directors declared a cash dividend of $2 per share for shareholders of record on August 5th, payable on August 12th. Refer to the chart of accounts for #of outstanding shares. Please include ALL outstanding shares as of August 5th. 4-Aug Received payment from Chris Craft for July 20th sale. Refer to AR ledger for amount. 4-Aug A bankruptcy judge disallowed Panther Pacific's claim for $7,000 due from Four Winns. Management decided to write off this accounts receivable. 5-Aug Paid $3,300 to DU Utility Co. to settle amount owed for a utilities bill that was recorded in July as an Account Payable, Check #5278. 6-Aug 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. 7-Aug Received and paid expense reports for travel and entertainment totaling $5,925, Check #5279. 8-Aug paid for office supplies purchased on August 2nd, Check #5280. END OF PAGE 2. THE ENTRIES AFTER THIS MUST GO ON PAGE 3 11-Aug Paid in full for the August 1st purchase from Raydar Marine, Check #5281. 11-Aug 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-Aug Paid the dividend that was declared on August 3rd, Check #5283. 13-Aug 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-Aug Purchased 1,850 Fish Finder units on credit from Raydar Marine for $50 per unit. 15-Aug Sold 3,500 Propellers on credit to Donzi for $99.00 per unit, Invoice 5557. 15-Aug Check #5284 was issued for payroll: $25,800 for salaried and $10,550 for wages. 16-Aug 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-Aug issued a credit to Sea Ray for the return of 350 defective fish finder units from the August 2nd sale. These units has a cost basis of $41.16 per unit. DO NOT RECORD IN INVENTORY CONTROL WORKSHEET. 17-Aug 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-Aug Received payment in full from Chris Craft for the August 1st sale. 20-Aug While inspecting the August 13th purchase, it was discovered that the Fish Finder units were programmed for South America instead of North America. Panther Pacific returned the entire order to Raydar Marine. This is input as a negative adjustment in the purchases columns on the inventory control tab. 20-Aug Panther Pacific purchased 2,800 shares of its own stock for $10 per share. 22-Aug Sold 2,650 Downriggers on credit to Sea Ray for $56 per unit, Invoice #5559. 23-Aug paid $195,000 of the $362,500 owed to Acme from July 25th, Check #5285. END OF PAGE 4. THE ENTRIES AFTER THIS MUST GO ON PAGE 5 23-Aug Received payment from Donzi for $175,000 of the $300,000 owed from July. 24-Aug Purchased a $3,000 international phone card for one of the sales representative's upcoming European business trip, Check #5286. 25-Aug Paid in full for the purchase from Acme on August 13, Check #5287 26-Aug Purchased 1,250 Downriggers from Scotty for $33 per unit paying in cash, Check #5288 27-Aug Sold 1,500 Downriggers on credit to Donzi for $61 per unit, Invoice 5558. 27-Aug Hired and paid a consultant $50,000 to devise a marketing plan. Panther Pacific's management felt this was necessary to develop brand awareness. Check #5289. 28-Aug Panther Pacific is behind in its mortgage payments to LMCU. Paid a total of $20,000 ($4,000 principal and $16,000 interest), Check #5290. 28-Aug Sold 1,000 treasury shares from August 20th transaction for $15 per share END OF PAGE 5. THE ENTRIES AFTER THIS MUST GO ON PAGE 6 29-Aug Received payment in full from Donzi for the August 27th transaction. 29-Aug Sold 3,000 shares of Grand Valley Marine, Inc stock for $18 per share. 29-Aug Check #5292 was issued for payroll: $25,800 for salaries and $11,950 for wages. 30-Aug Paid the first month's principal payment of $18,000 on the note payable from August 1 Boat US bank. In addition, paid one month's interest interest calculated BEFORE principal payment each month), Check #5293 30-Aug 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 Ending Inventory (EI) Purchases Purch $/Unit Purch $ Purch Units Date Sales Sale $/Unit (CGS) Sale Units (CGS) Sale $ (CGS) El Units 500 El $/Unit $ 40.00 El $ 20,000.00 Beg. Bal. $ Propellers Ending Inventory (EI) Purch Units Purchases Purch $/Unit Purch $ Sale Units (CGS) Sales Sale $/Unit (CGS) Sale $ (CGS) Date Beg. Bal. El Units 5200 El $/Unit $ 55.00 El $ $ 286,000.00 Downriggers Ending Inventory (EI) Purch Units Purchases Purch $/Unit Purch $ Sale Units (CGS) Sales Sale $/Unit (CGS) Sale $ (CGS) Date Beg. Bal. El Units 1400 El $/Unit $ 40.00 El $ 56,000.00 $ August Month-end Adjustments: Instructions: Please write the month end journal entries for each of the following scenarios listed below. Date each entry as of the end of the month. PLEASE list debits before credits and skip a line between entries. ONLY use account titles listed in the chart of accounts. 8/31 (A) Panther Pacific has earned one month of the prepaid rent received from their tenant that moved in at the beginning of August. 8/31 (B) The company estimates customer returns monthly. They estimate 1% of the credit sales of $1,500,000 for the month of August will be refunded. The related inventory returned amounts to $5,500. 8/31 (C) Panther Pacific estimates bad debt expense on a monthly basis rather than waiting until year-end. The company uses the allowance and aging of accounts receivable method. Based on recent industry estimates, Panther Pacific estimates that the allowance account should be 1.75% of accounts receivable. The ending AR balance is $530,000. At the end of the month (prior to this journal entry) there is a DEBIT balance of $1,250 in the Allowance for Doubtful Accounts account. Write the necessary adjusting entry. 8/31 (D) The Company took a physical inventory count on August 31 and found the following inventory on hand to be $346,350. The ending balance in the Inventory account (before this adjusting entry) was $368,461. Write the necessary adjusting entry. Grand Valley Marine shares are trading for $12 per share on August 31. Panther Pacific adjusts security investments to market value once a month. Write the adjusting entry for the change in stock value. 8/31 (E) 8/31 (F) Depreciation on the company's fixed assets for the JUST THE MONTH of August is as follows: 1. The equipment for the warehouse was purchased a 2 years ago for $61,000. These assets have a 5-year life, an expected salvage value of $1,000, and are depreciated using the straight-line method. 2. The office furniture was purchased last year for $22,500. these assets have a 7 year life, an expected salvage value of $1,500, and are depreicated using straight-line method. Credit Terms & Inventory Accounting Panther Pacific 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 Panther Pacific 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 Panther Pacific 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. Panther Pacific uses a perpetual inventory accounting system and a last-in, first-out (LIFO) 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. AUGUST JOURNAL TRANSACTIONS 1-Aug Purchased 5,000 Fish Finder units on Credit from Raydar Marine for $42.00 per unit. 1-Aug 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-Aug Signed a one-year 15%, $216,000 note payable with Boat US Bank. 1-Aug Sold 4,000 Propellers on account to Chris Craft for $85 per units, Invoice #5555. 2-Aug Actober). Rented part of the warehouse to a new tenant and received $18,000 for three months rent (August, September, 2-Aug Sold 5,200 Fish Finder units on account to Sea Ray for $82 per unit, Invoice #5556. 2-Aug 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-Aug Sold 900 Downriggers for $66 per unit and 800 propeller units for $86 per unit on account to Boston Whaler, Invoice #5560. 3-Aug The Board of Directors declared a cash dividend of $2 per share for shareholders of record on August 5th, payable on August 12th. Refer to the chart of accounts for #of outstanding shares. Please include ALL outstanding shares as of August 5th. 4-Aug Received payment from Chris Craft for July 20th sale. Refer to AR ledger for amount. 4-Aug A bankruptcy judge disallowed Panther Pacific's claim for $7,000 due from Four Winns. Management decided to write off this accounts receivable. 5-Aug Paid $3,300 to DU Utility Co. to settle amount owed for a utilities bill that was recorded in July as an Account Payable, Check #5278. 6-Aug 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. 7-Aug Received and paid expense reports for travel and entertainment totaling $5,925, Check #5279. 8-Aug paid for office supplies purchased on August 2nd, Check #5280. END OF PAGE 2. THE ENTRIES AFTER THIS MUST GO ON PAGE 3 11-Aug Paid in full for the August 1st purchase from Raydar Marine, Check #5281. 11-Aug 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-Aug Paid the dividend that was declared on August 3rd, Check #5283. 13-Aug 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-Aug Purchased 1,850 Fish Finder units on credit from Raydar Marine for $50 per unit. 15-Aug Sold 3,500 Propellers on credit to Donzi for $99.00 per unit, Invoice 5557. 15-Aug Check #5284 was issued for payroll: $25,800 for salaried and $10,550 for wages. 16-Aug 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-Aug issued a credit to Sea Ray for the return of 350 defective fish finder units from the August 2nd sale. These units has a cost basis of $41.16 per unit. DO NOT RECORD IN INVENTORY CONTROL WORKSHEET. 17-Aug 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-Aug Received payment in full from Chris Craft for the August 1st sale. 20-Aug While inspecting the August 13th purchase, it was discovered that the Fish Finder units were programmed for South America instead of North America. Panther Pacific returned the entire order to Raydar Marine. This is input as a negative adjustment in the purchases columns on the inventory control tab. 20-Aug Panther Pacific purchased 2,800 shares of its own stock for $10 per share. 22-Aug Sold 2,650 Downriggers on credit to Sea Ray for $56 per unit, Invoice #5559. 23-Aug paid $195,000 of the $362,500 owed to Acme from July 25th, Check #5285. END OF PAGE 4. THE ENTRIES AFTER THIS MUST GO ON PAGE 5 23-Aug Received payment from Donzi for $175,000 of the $300,000 owed from July. 24-Aug Purchased a $3,000 international phone card for one of the sales representative's upcoming European business trip, Check #5286. 25-Aug Paid in full for the purchase from Acme on August 13, Check #5287 26-Aug Purchased 1,250 Downriggers from Scotty for $33 per unit paying in cash, Check #5288 27-Aug Sold 1,500 Downriggers on credit to Donzi for $61 per unit, Invoice 5558. 27-Aug Hired and paid a consultant $50,000 to devise a marketing plan. Panther Pacific's management felt this was necessary to develop brand awareness. Check #5289. 28-Aug Panther Pacific is behind in its mortgage payments to LMCU. Paid a total of $20,000 ($4,000 principal and $16,000 interest), Check #5290. 28-Aug Sold 1,000 treasury shares from August 20th transaction for $15 per share END OF PAGE 5. THE ENTRIES AFTER THIS MUST GO ON PAGE 6 29-Aug Received payment in full from Donzi for the August 27th transaction. 29-Aug Sold 3,000 shares of Grand Valley Marine, Inc stock for $18 per share. 29-Aug Check #5292 was issued for payroll: $25,800 for salaries and $11,950 for wages. 30-Aug Paid the first month's principal payment of $18,000 on the note payable from August 1 Boat US bank. In addition, paid one month's interest interest calculated BEFORE principal payment each month), Check #5293 30-Aug 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 Ending Inventory (EI) Purchases Purch $/Unit Purch $ Purch Units Date Sales Sale $/Unit (CGS) Sale Units (CGS) Sale $ (CGS) El Units 500 El $/Unit $ 40.00 El $ 20,000.00 Beg. Bal. $ Propellers Ending Inventory (EI) Purch Units Purchases Purch $/Unit Purch $ Sale Units (CGS) Sales Sale $/Unit (CGS) Sale $ (CGS) Date Beg. Bal. El Units 5200 El $/Unit $ 55.00 El $ $ 286,000.00 Downriggers Ending Inventory (EI) Purch Units Purchases Purch $/Unit Purch $ Sale Units (CGS) Sales Sale $/Unit (CGS) Sale $ (CGS) Date Beg. Bal. El Units 1400 El $/Unit $ 40.00 El $ 56,000.00 $ August Month-end Adjustments: Instructions: Please write the month end journal entries for each of the following scenarios listed below. Date each entry as of the end of the month. PLEASE list debits before credits and skip a line between entries. ONLY use account titles listed in the chart of accounts. 8/31 (A) Panther Pacific has earned one month of the prepaid rent received from their tenant that moved in at the beginning of August. 8/31 (B) The company estimates customer returns monthly. They estimate 1% of the credit sales of $1,500,000 for the month of August will be refunded. The related inventory returned amounts to $5,500. 8/31 (C) Panther Pacific estimates bad debt expense on a monthly basis rather than waiting until year-end. The company uses the allowance and aging of accounts receivable method. Based on recent industry estimates, Panther Pacific estimates that the allowance account should be 1.75% of accounts receivable. The ending AR balance is $530,000. At the end of the month (prior to this journal entry) there is a DEBIT balance of $1,250 in the Allowance for Doubtful Accounts account. Write the necessary adjusting entry. 8/31 (D) The Company took a physical inventory count on August 31 and found the following inventory on hand to be $346,350. The ending balance in the Inventory account (before this adjusting entry) was $368,461. Write the necessary adjusting entry. Grand Valley Marine shares are trading for $12 per share on August 31. Panther Pacific adjusts security investments to market value once a month. Write the adjusting entry for the change in stock value. 8/31 (E) 8/31 (F) Depreciation on the company's fixed assets for the JUST THE MONTH of August is as follows: 1. The equipment for the warehouse was purchased a 2 years ago for $61,000. These assets have a 5-year life, an expected salvage value of $1,000, and are depreciated using the straight-line method. 2. The office furniture was purchased last year for $22,500. these assets have a 7 year life, an expected salvage value of $1,500, and are depreicated using straight-line method