Page 268 - Accounting Principles (A Business Perspective)

6. Merchandising transactions

Granted Terms Paid
a. 30%, 20% 2/10, n/30 July 10
b. 40%, 10% 2/EOM, n/60 August 10
c. 30%, 10%, 5% 3/10/EOM, n/60 August 10
d. 40% 1/10, n/30 July 12
Exercise F Raiser Company purchased goods at a gross selling price of USD 2,400 on August 1. Discount terms
of 2/10, n/30 were available. For each of the following independent situations, determine (1) the cash discount
available on the final payment and (2) the amount paid if payment is made within the discount period.
Purchase
Transportation Freight Allowance
Terms Paid (by) Granted
a. FOB shipping point $240 (buyer) $480
b. FOB destination 120 (seller) 240
c. FOB shipping point 180 (seller) 720
d. FOB destination 192 (buyer) 120
Exercise G Stuart Company purchased goods for USD 84,000 on June 14, under the following terms: 3/10, n/
30; FOB shipping point, freight collect. The bill for the freight was paid on June 15, USD 1,200.
a. Assume that the invoice was paid on June 24, and prepare all entries required on Stuart Company's books.
b. Assume that the invoice was paid on July 11. Prepare the entry to record the payment made on that date.

Exercise H Cramer Company uses periodic inventory procedure. Determine the cost of goods sold for the
company assuming purchases during the period were USD 40,000, transportation-in was USD 300, purchase
returns and allowances were USD 1,000, beginning inventory was USD 25,000, purchase discounts were USD
2,000, and ending inventory was USD 13,000.
Exercise I In each case, use the following information to calculate the missing information:
Case 1 Case 2 Case 3
Gross sales $ 640,000 $ ? $ ?
Sales discounts ? 25,600 19,200
Sales returns and allowances 19,200 44,800 32,000
Net sales 608,000 1,209,600
Merchandise inventory, January 1 256,000 384,000
Purchases 384,000 768,000
Purchase discounts 7,680 13,440 12,800
Purchase returns and allowances 24,320 31,360 32,000
Net purchases 352,000 672,000
Transportation-in 25,600 38,400 32,000
Net cost of purchases 377,600 761,600 ?
Cost of goods available for sale ? 1,081,600 1,088,000
Merchandise inventory, December 31 ? 384,000 448,000
Cost of goods sold 320,000 ? 640,000
Gross margin 512,000 320,000

Exercise J In each of the following equations supply the missing term(s):
a. Net sales = Gross sales - (______________________ + Sales returns and allowances).
b. Cost of goods sold = Beginning inventory + Net cost of purchases - ________ ________.
c. Gross margin = ________ ________ - Cost of goods sold.
d. Income from operations = __________ _________ - Operating expenses.
e. Net income = Income from operations + _________ ________ - ________ ________.
Exercise K Given the balances in this partial trial balance, indicate how the balances would be treated in the
work sheet. The ending inventory is USD 96. (The amounts are unusually small for ease in rewriting the numbers.

We purposely left out the Statement of Retained Earnings columns since they are not used.)
Adjustments Adjusted Income
Accounts Titles Trial Balance Trial Balance Statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit

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