Page 272 - Accounting Principles (A Business Perspective)

6. Merchandising transactions

• Prepaid rent expired during the year is USD 50,600.
• Depreciation expense on store equipment is USD 8,800.

• Accrued sales salaries are USD 4,000.
• Accrued office salaries are USD 3,000.
• Merchandise inventory on hand is USD 350,000.
Prepare the following:
a. A work sheet for the year ended 2010 December 31. Refer to the chart of accounts shown in a separate file at
the end of the text for any other account numbers you need.
b. A classified income statement. The only selling expenses are sales salaries, advertising, supplies, and

depreciation expense—equipment.
c. A statement of retained earnings.
d. A classified balance sheet.
e. Required closing entries.
Alternate problems
Alternate problem A a. Candle Carpet Company engaged in the following transactions in August 2010:

Aug. 2 Sold merchandise on account for USD 300,000; terms 2/10, n/30, FOB shipping point, freight collect.
18 Received payment for the sale of August 2.
20 A total of USD 10,000 of the merchandise sold on August 2 was returned, and a full refund was made
because it was the wrong merchandise.
28 An allowance of USD 16,000 was granted on the sale of August 2 because some merchandise was found to be
damaged; USD 16,000 cash was returned to the customer.
b. Lee Furniture Company engaged in the following transactions in August 2010:

Aug. 4 Purchased merchandise on account at a cost of USD 140,000; terms 2/10, n/30, FOB shipping point,
freight collect.
6 Paid freight of USD 2,000 on the purchase of August 4.
10 Sold goods for USD 100,000; terms 2/10, n/30.
12 Returned USD 24,000 of the merchandise purchased on August 4.
14 Paid the amount due on the purchase of August 4.
Prepare journal entries for the transactions.
Alternate problem B Edwardo Auto Parts Company and Spoon Company engaged in the following
transactions with each other during August 2010:

Aug.15 Edwardo Auto Parts Company purchased merchandise on account with a list price of USD 192,000 from
Spoon Company. Trade discounts of 20 per cent and 10 per cent were allowed. Terms were 2/10, n/30, FOB
destination, freight prepaid.
16 The seller paid the freight charges, USD 2,400.
17 The buyer requested an allowance of USD 4,512 against the amount due because the goods were damaged in
transit.
20 The seller granted the allowance requested on August 17.

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