Reporting Cash, Inventory Orders, Purchases, Sales, Returns, and (Gross Method) Discounts (Chapters 5 and 6)
(a) On October 1, the Business Students’ Society (BSS) placed an order for 100 golf shirts at a unit cost of $20, under terms 2/10, n/30. (b) The order was received on October 10, but some golf shirts differed from what had been ordered. Uncertain whether the shirts would be returned or kept, BSS decided to record any purchase discount only when taken (using the gross method). (c) On October 11, 20 golf shirts were returned to the supplier. (d) On October 12, BSS complained the remaining golf shirts were slightly defective so the supplier granted a $100 allowance. (e) BSS paid for the golf shirts on October 13. (f) During the first week of October, BSS received student and faculty orders for 80 golf shirts, at a unit price of $60, on terms 2/10, n/30. (g) The golf shirts were delivered to these customers on October 18. Unfortunately, customers were unhappy with the golf shirts, so BSS permitted them to be returned or given an allowance (see h and i). Uncertain whether customers would keep or return the shirts, BSS decided to record any sales discount only when taken (using the gross method). (h) On October 19, one-half of the golf shirts were returned by customers to BSS. (i) On October 20, an allowance was given on account equal to $12.50 per shirt for the remaining 40 shirts. (j) The customers paid their remaining balances on the last day of the month, October 31.
Required:
- 1. Create a five-column table, in which the first column lists events (a) through (j), and the second through fifth columns show the impact of the events on Inventory, Net Sales, Cost of Goods Sold, and Gross Profit.
- 2. Determine the percentage of net sales that is available to cover operating expenses other than cost of goods sold. By what name is this percentage commonly known?
- 3. As of October 31, the check dated October 13 had not cleared the bank. How should BSS report this on its October 31 bank reconciliation? Give the
journal entry , if any, needed as a result of including this item in the bank reconciliation.
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
FUND OF FIN ACCT(LL) W/CONNECT ACCESS
- Catherines Cookies has a beginning balance in the Accounts Payable control total account of $8,200. In the cash disbursements journal, the Accounts Payable column has total debits of $6,800 for November. The Accounts Payable credit column in the purchases journal reveals a total of $10,500 for the current month. Based on this information, what is the ending balance in the Accounts Payable account in the general ledger?arrow_forwardSandren Co. purchased inventory on credit from Acto Supply Co. for $4,000. Sandren Co. would record this transaction in the ________. A. general journal B. cash receipts journal C. cash disbursements journal D. purchases journal E. sales journalarrow_forwardPost the following November transactions to T-accounts for Accounts Payable, Inventory, and Cash, indicating the ending balance. Assume no beginning balances in Accounts Payable and Inventory, and a beginning Cash balance of $36,500. A. purchased merchandise inventory on account, $16,000 B. paid vendors for part of inventory purchased earlier in month, $12,000 C. purchased merchandise inventory for cash, $10,500arrow_forward
- The following transactions were completed by Nelsons Hardware, a retailer, during September. Terms on sales on account are 1/10, n/30, FOB shipping point. Sept. 4Received cash from M. Alex in payment of August 25 invoice of 275, less cash discount. 7Issued Ck. No. 8175, 915.75, to Top Tools, Inc., for invoice. no. 2256, recorded previously for 925, less cash discount of 9.25. 10Sold merchandise in the amount of 175 on a credit card. Sales tax on this sale is 8%. The credit card fee the bank deducted for this transaction is 5. 11Issued Ck. No. 8176, 653.40, to Snap Tools, Inc. for invoice no. 726, recorded previously on account for 660. A trade discount of 15% was applied at the time of purchase, and Snap Tools, Inc.s credit terms are 1/10, n/45. 15Received 95 cash in payment of August 20 invoice from N. Johnson. No cash discount applied. 19Received 1,165 cash in payment of a 1,100 note receivable and interest of 65. 22Voided Ck. No. 8177 due to error. 26Received and paid telephone bill, 62; Ck. No. 8178, payable to Southern Telephone Company. 30Paid wages recorded previously for the month, 3,266, Ck. No. 8179. Required 1. Journalize the transactions for September in the cash receipts journal, the general journal (for the transaction on Sept. 10th), or the cash payments journal as appropriate. Assume the periodic inventory method is used. 2. If you are using Working Papers, total and rule the journals. Prove the equality of debit and credit totals.arrow_forwardThe following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. If you are using the form-based approach with QuickBooks or general ledger, select Cash Sales as the customer for all cash sales transactions. Required 1. Record the transactions for January using a general journal, page 1. Assume the periodic inventory method is used. If using QuickBooks, record transactions using either the journal entry method or the forms-based approach as directed by your instructor. The chart of accounts is as follows: 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily the general journal entries to the general ledger. Write the owners name in the Capital and Drawing accounts. If using QuickBooks or general ledger, ignore Steps 2, 3, and 4. 5. Prepare a trial balance. 6. Prepare a schedule of accounts receivable (A/R Aging Detail report in QuickBooks) and a schedule of accounts payable (A/P Summary Detail report in QuickBooks). Do the totals equal the balances of the related controlling accounts?arrow_forwardThe following transactions were completed by Hammond Auto Supply during January, which is the first month of this fiscal year. Terms of sale are 2/10, n/30. The balances of the accounts as of January 1 have been recorded in the general ledger in your Working Papers or in CengageNow. Hammond Auto Supply does not track cash sales by customer. If you are using the form-based approach with QuickBooks or general ledger, select Cash Sales as the customer for all cash sales transactions. Required 1. Record the transactions for January using a sales journal, page 73; a purchases journal, page 56; a cash receipts journal, page 38; a cash payments journal, page 45; and a general journal, page 100. Assume the periodic inventory method is used. 2. Post daily all entries involving customer accounts to the accounts receivable ledger. 3. Post daily all entries involving creditor accounts to the accounts payable ledger. 4. Post daily those entries involving the Other Accounts columns and the general journal to the general ledger. Write the owners name in the Capital and Drawing accounts. 5. Add the columns of the special journals and prove the equality of the debit and credit totals on scratch paper. 6. Post the appropriate totals of the special journals to the general ledger. 7. Prepare a trial balance. 8. Prepare a schedule of accounts receivable and a schedule of accounts payable. Do the totals equal the balances of the related controlling accounts?arrow_forward
- Prepare journal entries for the following sales and cash receipts transactions. (a) Merchandise is sold on account for 300 plus 3% sales tax, with 2/10, n/30 cash discount terms. (b) Part of the merchandise sold in transaction (a) for 70 plus sales tax is returned for credit. (c) The balance on account for the merchandise sold in transaction (a) is paid in cash within the discount period.arrow_forwardScrepcap Co. had the following transactions during the first week of June: June 1Purchased merchandise on account from Acme Supply, 2,700, plus freight charges of 160. 1Issued Check No. 219 to Denver Wholesalers for merchandise purchased on account, 720, less 1% discount. 1Sold merchandise on account to F. Colby, 246, plus 5% state sales tax plus 2% city sales tax. June 2Received cash on account from N. Dunlop, 315. 2Made cash sale of 413 plus 5% state sales tax plus 2% city sales tax. 2Purchased merchandise on account from Permon Co., 3,200, plus freight charges of 190. 3Sold merchandise on account to F. Ayres, 211, plus 5% state sales tax plus 2% city sales tax. 3Issued Check No. 220 to Ellis Co. for merchandise purchased on account, 847, less 1% discount. 3Received cash on account from F. Graves, 463. 4Issued Check No. 221 to Penguin Warehouse for merchandise purchased on account, 950, less 1% discount. 4Sold merchandise on account to K. Stanga, 318, plus 5% state sales tax plus 2% city sales tax. 4Purchased merchandise on account from Mason Milling, 1,630, plus freight charges of 90. 4Received cash on account from O. Alston, 381. 5Made cash sale of 319 plus 5% state sales tax plus 2% city sales tax. 5Issued Check No. 222 to Acme Supply for merchandise purchased on account, 980, less 1% discount. Required 1. Record the transactions in a general journal. 2. Assuming these are the types of transactions Screpcap Co. experiences on a regular basis, design the following special journals for Screpcap: (a) Sales journal (b) Cash receipts journal (c) Purchases journal (d) Cash payments journalarrow_forwardPreston Company sells candy wholesale, primarily to vending machine operators. Terms of sales on account are 2/10, n/30, FOB shipping point. The following transactions involving cash receipts and sales of merchandise took place in May of this year: Required 1. Journalize the transactions for May in the cash receipts journal and the sales journal. Assume the periodic inventory method is used. 2. If you are using Working Papers, total and rule the journals and prove the equality of the debit and credit totals.arrow_forward
- Ali Co. uses a sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. Prepare a cash receipts journal like the one in Exhibit 7.7. Journalize the following transactions that should be recorded in the cash receipts journal. Nov. 3 The company purchased $3,200 of merchandise on credit from Hart Co., terms n/20. 7 The company sold merchandise costing $840 to J. Than for $1,000 on credit, subject to a $20 sales discount if paid by the end of the month. 9 The company borrowed $3,750 cash by signing a note payable to the bank. 13 J. Ali, the owner, contributed $5,000 cash to the company. 18 The company sold merchandise costing $250 to B. Cox for $330 cash. 22 The company paid Hart Co. $3,200 cash for the merchandise purchased on November 3. 27 The company received $980 cash from J. Than in payment of the November 7 purchase. 30 The company paid salaries of $1,650 in cash.arrow_forwardrecord any necessary journal entries for Mary’s Hat Shop April 10 Mary's Hat Shop purchases $2500 worth of merchandise with cash from a manufacturer. Shipping charges are an extra $120.00 cash. Termsof the purchase are FOB shipping point. April 14 Mary’s Hat Shop sells $3,000 worth of merchandise to a customer who pays with cash. The merchandise has a cost to Mary’s of $1,800. Shipping charges are an extra $120 cash. Terms of the sale are FOB Shipping Point. Assume the perpetual inventory system is used.arrow_forwardCash Discount Calculations On June 1, Forest Company sold merchandise with a list price of $25,000. For each of the sales terms below, determine the proper amount of cash received:arrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781305084087Author:Cathy J. ScottPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage