Merchandising Operations

Question: Journalize the following transactions for Santa Fe Art Gift Shop. Assume Santa Fe uses the gross method to record sales revenue. Explanations are not required.

Feb. 3 Purchased \(2,800 of merchandise inventory on account under terms 3/10, n/EOM and FOB shipping point. 

7 Returned \)700 of defective merchandise purchased on February 3. 

9 Paid freight bill of \(400 on February 3 purchase. 

10 Sold merchandise inventory on account for \)4,800. Payment terms were 1/15, n/30. These goods cost the company $2,400. 

12 Paid amount owed on credit purchase of February 3, less the return and the discount. 

 28 Received cash from February 10 customer in full settlement of their debt.

Question: Journalize the following sales transactions for Austin Mall. Assume Austin Mall uses the gross method to record sales revenue. Explanations are not required. 

Jan. 4 Sold \(10,000 of antiques on account, credit terms are 1/15, n/30. Cost of goods is \)5,000. 

20 Austin Mall received payment from the customer on the amount due from Jan. 4. 

20 Sold \(5,200 of antiques on account, credit terms are 1/10, n/45, FOB destination. Cost of goods is \)2,600. 

20 Austin Mall paid $120 on freight out. 

29 Received payment from the customer on the amount due from Jan. 20, less the discount.

Question: Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue. 

12 Sierra receives payment from the customer on the amount due, less the discount.

Question: Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800. Click uses the gross method for recording sales revenue.

26 Received payment from the customer on balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

Question: Journalize the following sales transactions for Paul Sportswear. Explanations are not required.

Aug. 1 Paul sold \(66,000 of women’s sportswear on account, credit terms are 2/10, n/30. Cost of goods is \)33,000. Paul uses the gross method to record sales revenue.

25 Paul receives payment from the customer on the amount due.

Question: Journalize the following transactions that occurred in September 2018 for Cardinal. Assume Cardinal uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Sep. 3 Purchased merchandise inventory on account from Sherry Wholesalers, \(4,000. Terms 1/15, n/EOM, FOB shipping point. 

4 Paid freight bill of \)75 on September 3 purchase. 

4 Purchased merchandise inventory for cash of \(1,900. 

6 Returned \)1,100 of inventory from September 3 purchase. 

8 Sold merchandise inventory to Houston Company, \(5,500, on account. Terms 3/15, n/35. Cost of goods, \)2,365. 

9 Purchased merchandise inventory on account from Tarin Wholesalers, \(12,000. Terms 3/10, n/30, FOB destination. 

10 Made payment to Sherry Wholesalers for goods purchased on September 3, less return and discount. 

13 After negotiations, received a \)200 allowance from Tarin Wholesalers. 

15 Sold merchandise inventory to Java Company, \(3,300, on account. Terms 2/10, n/EOM. Cost of goods, \)1,320. 

22 Made payment, less allowance, to Tarin Wholesalers for goods purchased on September 9. 

25 Sold merchandise inventory to Smecker for \(1,900 on account that cost \)722. Terms of 1/10, n/30 were offered, FOB shipping point. As a courtesy to Smecker, $85 of freight was added to the invoice for which cash was paid by Cardinal. 

28 Received payment from Houston Company. 

29 Received payment from Smecker, less discount. 

30 Received payment from Java Company.

Question: Journalize the following transactions that occurred in November 2018 for May’s Adventure Park. Assume May’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Nov. 4 Purchased merchandise inventory on account from Valera Company, \(8,000. Terms 1/10, n/EOM, FOB shipping point. 

6 Paid freight bill of \)160 on November 4 purchase. 

8 Returned half the inventory purchased on November 4 from Valera Company. 

10 Sold merchandise inventory for cash, \(1,700. Cost of goods, \)680. FOB destination. 

11 Sold merchandise inventory to Garrison Corporation, \(10,300, on account, terms of 3/10, n/EOM. Cost of goods, \)5,150. FOB shipping point. 

12 Paid freight bill of \(30 on November 10 sale. 

13 Sold merchandise inventory to Cain Company, \)9,000, on account, terms of 1/10, n/45. Cost of goods, \(4,500. FOB shipping point. 

14 Paid the amount owed on account from November 4, less return and discount. 

18 Purchased inventory of \)3,700 on account from Regan Corporation. Payment terms were 2/10, n/30, FOB destination. 

20 Received cash from Garrison Corporation, less discount. 

26 Paid amount owed on account from November 18, less discount. 

28 Received cash from Cain Company. 

29 Purchased inventory from Sanders Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)200.

Question: Journalize the following transactions that occurred in March 2018 for Faucet. Assume Faucet uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(3,500. Terms 2/15, n/EOM, FOB shipping point. 

4 Paid freight bill of \)75 on March 3 purchase. 

4 Purchased merchandise inventory for cash of \(2,200. 

6 Returned \)800 of inventory from March 3 purchase. 

8 Sold merchandise inventory to Harvey Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,508. 

9 Purchased merchandise inventory on account from Teaton Wholesalers, \(6,000. Terms 2/10, n/30, FOB destination. 

10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount. 

13 After negotiations, received a \)100 allowance from Teaton Wholesalers. 

15 Sold merchandise inventory to Jackson Company, \(2,900, on account. Terms n/EOM. Cost of goods, \)1,276. 

22 Made payment, less allowance, to Teaton Wholesalers for goods purchased on March 9. 

25 Sold merchandise inventory to Secker for \(2,000 on account that cost \)880. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Secker, $85 of freight was added to the invoice for which cash was paid by Faucet. 

28 Received payment from Harvey Company. 

29 Received payment from Secker, less discount. 

30 Received payment from Jackson Company.

Match the accounting terminology to the definitions.

Click Computers has the following transactions in July related to the purchase of merchandise inventory.

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30. 

        3 Return of \)4,000 of the computers to the vendor. 

        9 Payment made on the account. 

Journalize the purchase transactions for Click Computers assuming the company uses the perpetual inventory system.

Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800.

        26 Received payment from the customer on the balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

What is the Cost of Goods Sold (COGS), and where is it reported?

Click Computers’ Merchandise Inventory account at year-end is showing a balance of \(43,000. The physical count of inventory came up with \)42,500. Journalize the adjusting entry needed to account for the inventory shrinkage. The company uses the perpetual inventory system.

Question: Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses                                                      $ 10,500 

Interest Revenue                                                            1,000 

Net Sales Revenue                                                     113,500 

Cost of Goods Sold                                                     85,000 

Administrative Expenses                                              8,000

Prepare the multi-step income statement for the year ended December 31, 2018.

Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses                                                                $ 10,500 

Interest Revenue                                                                      1,000 

Net Sales Revenue                                                               113,500 

Cost of Goods Sold                                                               85,000 

Administrative Expenses                                                         8,000

Determine the gross profit percentage for the year ended December 31, 2018.

Click Computers has the following transactions related to the sale of merchandise inventory.

Mar. 1 Sold a computer (cost of \(3,000) for \)8,000 to a customer. The customer paid cash. The sales price included a one-year service contract valued at $168.

Dec. 31 Recorded the amount of service contract earned.

Journalize the transactions for Click Computers assuming that the company uses the perpetual inventory system.

Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30. 

        3 Return of \)4,000 of the computers to the vendor. 

        9 Payment made on the account. 

       12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30. 

       26 Received payment from customer on balance due.

Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.

What is a merchandiser, and what is the name of the merchandise that it sells?

What are the two types of merchandisers? How do they differ?

Describe the operating cycle of a merchandiser.

How is gross profit calculated, and what does it represent?

What are the two types of inventory accounting systems? Briefly describe each.

What is an invoice?

What account is debited when recording a purchase of inventory when using the perpetual inventory system?

What would the credit terms of “2/10, n/EOM” mean?

What is a purchase return? How does a purchase allowance differ from a purchase return?

Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?

How is the net cost of inventory calculated?

What are the two journal entries involved when recording the sale of inventory when using the perpetual inventory system?

Under the new revenue recognition standard, how is the sale of inventory recorded?

Under the new revenue recognition standard, what most companies do at the end of the period related to sales returns? Describe the journal entries that would be recorded.

When granting a sales allowance is there a return of merchandise inventory from the customer? Describe the journal entry(ies) that would be recorded.

What is freight out and how is it recorded by the seller?

What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for inventory shrinkage.

What are the four steps involved in the closing process for a merchandising company?

Describe the single-step income statement.

Describe the multi-step income statement.

What financial statement is merchandise inventory reported on, and in what section?

What does the gross profit percentage measure, and how is it calculated?

When a company has a contract involving multiple performance obligations, how must the company recognize revenue?

What account is debited when recording a purchase of inventory when using a periodic inventory system?

When recording purchase returns and purchase allowances under the periodic inventory system, what account is used?

Comparing periodic and perpetual inventory systems

For each statement below, identify whether the statement applies to the periodic inventory system, the perpetual inventory system, or both.

a. Normally used for relatively inexpensive goods. 

b. Keeps a running computerized record of merchandise inventory. 

c. Achieves better control over merchandise inventory. 

d. Requires a physical count of inventory to determine the quantities on hand. 

e. Uses bar codes to keep up-to-the-minute records of inventory.

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

       12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to   damage during shipment.

       15 Toys and More paid the amount due, less the return and discount.

Requirements 

1. Journalize the purchase transactions. Explanations are not required. 

2. In the final analysis, how much did the inventory cost Toys and More?

What account is debited when recording the payment of freight when using the periodic inventory system?

Describe the journal entry(ies) when recording a sale of inventory using the periodic inventory system.

Question: Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point. 

6 Paid freight bill of \)150 on January 4 purchase. 

8 Returned half the inventory purchased on January 4 from Vanderbilt Company. 

10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination. 

11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point. 

12 Paid freight bill of \(30 on January 10 sale. 

13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point. 

14 Paid the amount owed on account from January 4, less return and discount. 

18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination. 

20 Received cash from Gilmore Corporation, less discount. 

26 Paid amount owed on account from January 18, less discount. 

28 Received cash from Cadet Company. 

29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.

Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Explain.

Highlight the differences in the closing process when using the periodic inventory system rather than the perpetual inventory system.

Describe the calculation of cost of goods sold when using the periodic inventory system.