Merchandising Operations

Rae Philippe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, auditors would come to do a physical count of the inventory at each warehouse. Recently, Rae’s brother started his own drilling company and persuaded Rae to “loan” him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. “Send me over 80 joints of 5-inch pipe tomorrow, and I’ll get them back to you ASAP,” said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a “no-exception” report.

Requirements 

1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice? 

2. How would this kind of action affect the financial performance of the company?

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.

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.

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.

Suppose Muddyriver.com sells 2,000 books on account for \(19 each (cost of these books is \)22,800), credit terms 1/20, n/45 on October 10, to The Salem Store. The Salem Store paid the balance to Muddyriver.com on October 22.

Requirements 

1. Journalize the Salem Store’s October transactions. 

2. Journalize Muddyriver.com’s October transactions. Assume Muddyriver.com uses the gross method to record sales revenue.

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.

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.

Rae Philippe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, auditors would come to do a physical count of the inventory at each warehouse. Recently, Rae’s brother started his own drilling company and persuaded Rae to “loan” him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. “Send me over 80 joints of 5-inch pipe tomorrow, and I’ll get them back to you ASAP,” said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a “no-exception” report.

Requirements 

1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice? 

2. How would this kind of action affect the financial performance of the company?

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.

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.

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.

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.