Merchandising Operations: Extra Practice - VCC Library Homepage

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Accounting for Merchandising. Operations: Extra Practice Problems. 1. Indicate whether the following are debit or credit accounts: a. Sales b. Cost of goods sold.
HOSP 1210 (Financial Acct)

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Accounting for Merchandising Operations: Extra Practice Problems 1. Indicate whether the following are debit or credit accounts: c. Sales discount a. Sales b. Cost of goods sold d. Sales returns and allowances

2. What is the major difference between: a. Perpetual and Periodic inventory system, and, b. FOB shipping point and FOB destination point? 3. Information related to Denny’s Pizzeria is presented below: a. July 01, purchased merchandise from OK Tomato Sauce for $17,000, terms 2/10 n/30, FOB shipping point. b. July 05, paid $900 freight costs on merchandise bought from OK Tomato Sauce. c. July 08, purchased equipment on account for $26,000. d. July 09, returned damaged merchandise to OK Tomato Sauce and received a $3,000 allowance. e. July 10, paid the amount due to OK Tomato Sauce in full. Instructions: Prepare the journal entries to record these transactions on the books of Denny’s Pizzeria under a perpetual inventory system. 4. Dolores Mission operates Lola’s All-Star Tennis Shop. At the beginning of the season, the ledger of Lola’s All-Star Tennis Shop showed Cash $2,500; Merchandise Inventory $3,500 and Common Stock $6,000. The following transactions were completed during June 2009: June 02 June 05 June 07 June 09 June 10

June 11 June 16

Purchased tennis rackets and balls on account from Noe Valley Co. for $1,600, FOB shipping point, terms 2/10, n/60. Paid freight on Noe Valley purchase, $80. Received credit from Noe Valley Co. for merchandise returned, $100. Sold merchandise on account, $1,100. Merchandise sold had a cost of $730. Purchased shoes, shirts and other accessories from Lombard Sportswear, $600, terms 1/10, n/30. Payment was settled with cash immediately. Paid Noe Valley Co. in full. Received cash refund of $60 from Lombard Sportswear for merchandise returned. Received cash of $400 for tennis shirts sold to customers. Granted an allowance to customers for tennis shirts that did not fit, $40

June 17 June 26 Instructions: a. Journalize the June transactions using a perpetual inventory system. b. Enter the beginning balances in a ledger accounts and post the June transactions. (Use J1 for the journal reference) c. Prepare a trial balance on June 30, 2009. © 2013 Vancouver Community College Learning Centre. Student review only. May not be reproduced for classes.

Authored by Nabeela Rahman

Solutions

1. a. Sales: Credit b. Cost of goods sold: Debit

c. Sales discount: Debit d. Sales returns and allowances: Debit

2. a. The perpetual inventory system records the details of the cost of each inventory purchase and sale. The periodic inventory system determines the cost of goods sold only at the end of the accounting period. b. In Free on Board (FOB) shipping point, the buyer pays the freight costs. In FOB destination point, the seller pays the freight costs. 3. Date July 01 July 05 July 08 July 09 July 10

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Account Title & Explanation Merchandise Inventory Accounts Payable Merchandise Inventory Cash Equipment Accounts Payable Accounts Payable Merchandise Inventory Accounts Payable Merchandise Inventory Cash

Debit $17,000

Account Title & Explanation Merchandise Inventory Accounts Payable Merchandise Inventory Cash Accounts Payable Merchandise Inventory Accounts Receivable Sales Cost of goods sold Merchandise Inventory Merchandise Inventory Merchandise Inventory ($600 x 1%) Cash Accounts Payable ($1,600 – $100) Merchandise Inventory ($1,500 x 2%) Cash Cash Merchandise Inventory Cash Sales Sales Returns and Allowances Cash

Debit $1,600

Credit $17,000

900 900 26,000 26,000 3,000 3,000 14,000 280 13,720

a) Date June 02 June 05 June 07 June 09

June 10

June 11

June 16 June 17 June 26

© 2013 Vancouver Community College Learning Centre. Student review only. May not be reproduced for classes.

Credit $1,600

80 80 100 100 1,100 1,100 730 730 600 6 594 1,500 30 1,470 60 60 400 400 40 40

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b) Account Title: Cash Date Explanation June 01 Balance June 05 June 10 June 11 June 16 June 17 June 26

Ref. J1 J1 J1 J1 J1

Debit 2,500

Credit 80 594 1,470

60 400 40

Account Title: Accounts Receivable Date Explanation Ref. June 09 J1 Account Title: Merchandise Inventory Date Explanation Ref. June 01 Balance June 02 J1 June 05 J1 June 07 J1 June 09 J1 June 10 J1 June 10 J1 June 11 J1 June 16 J1 Account Title: Accounts Payable Date Explanation Ref. June 02 June 07 June 11

Balance 2,500 2420 1826 356 416 816 776

Debit 1,100

Credit

Balance 1,100

Debit 3,500 1,600 80

Credit

Balance 3,500 5,100 5,180 5,080 4,350 4,950 4,944 4,914 4,854

100 730 600 6 30 60

1,500

Balance 1,600 1,500 0

Debit

Credit 6,000

Balance 6,000

Debit

Credit 1,100 400

Balance 1,100 1,500

Account Title: Sales Returns and Allowances Date Explanation Ref. Debit June 26 J1 40

Credit

Balance 40

Account Title: Cost of Goods Sold Date Explanation Ref. June 09 J1

Credit

Balance 730

Account Title: Common Stock Date Explanation Ref. June 01 Balance Account Title: Sales Date Explanation June 09 June 17

Ref. J1 J1

Debit

Credit 1,600

100

Debit 730

© 2013 Vancouver Community College Learning Centre. Student review only. May not be reproduced for classes.

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c) Lola’s All-Star Tennis Shop Trial Balance June 30, 2009 Account

Debit

Cash Accounts Receivable Merchandise Inventory Accounts payable Common Stock Sales Sales returns and allowances Cost of goods sold

776 1,100 4,854

Credit

0 6,000 1,500 40 730 7,500

7,500

Reference: Weygandt, J. et al. Hospitality Financial Accounting. Second Edition. John Wiley and Sons, Inc, New Jersey. 2009

© 2013 Vancouver Community College Learning Centre. Student review only. May not be reproduced for classes.

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