Chapter 5 - SOLUTION PDF

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SOLUTION...

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Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh

Canadian Edition

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 5-1 (a) & (b) Company A Cost of goods sold = $227,500 ($350,000-$122,500) Profit = $17,500 ($122,500-$105,000) (c) & (d) Company B Gross profit = $367,500 ($735,000-$367,500) Operating expenses = $294,000 ($367,500-$73,500) (e) & (f) Company C Gross Profit = $210,000 ($525,000-$315,000) Profit = $94,500 ($210,000-$115,500) (g) & (h) Company D Sales = $495,000 ($346,500+$148,500) Loss = $(39,600) ($148,500-$188,100)

BRIEF EXERCISE 5-2 ( 1) ( a) Costofgoodsavai l abl ef orsal e=$250, 000+$170, 000 =$420, 000. ( b)Costofgoodssol d=$420, 000–$50, 000=$370, 000 ( 2) ( c) Costofgoodsavai l abl ef orsal e=$108, 000+$70, 000= $178, 000. ( d)Endi ngi nvent or y=$178, 000–$90, 000=$88, 000. ( 3) ( e) Pur chases=$130, 000–$75, 000=$55, 000. ( f ) Endi ngi nvent or y=$130, 000–$38, 000=$92, 000. ( 4) ( g)Begi nni ngi nvent or y=$95, 000–$75, 000=$20, 000. ( h)Costofgoodssol d=$95, 000–$45, 000=$50, 000.

Solutions Manual 5-1 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh

Canadian Edition

BRIEF EXERCISE 5-3 (a) Mar. 16 Merchandise Inventory.................... 15,000 Accounts Payable........................ 15,000 18 Accounts Payable............................. Merchandise Inventory................

750 750

25 Accounts Payable ($15,000 – $750) 14,250 Merchandise Inventory ($14,250 × 2%).............................. 285 Cash.............................................. 13,965 (b) Date Mar. 16 18 25

Assets Inventory + $15,000 Inventory – $750 Inventory – $285 Cash – $13,965

Liabilities Accounts Payable + $15,000 Accounts Payable – $750 Accounts Payable – $14,250

Owner’s Equity NE NE NE

BRIEF EXERCISE 5-4 Jan. 2 Merchandise Inventory.................... 20,000 Accounts Payable........................ 20,000 Jan. 4 Merchandise Inventory.................... Cash..............................................

215

Jan. 6 Accounts Payable............................. Merchandise Inventory................

1,500

Feb. 1

Solutions Manual

215

1,500

Accounts Payable............................. 18,500 Cash.............................................. 18,500

5-2

Chapter 5

© 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh

Canadian Edition

BRIEF EXERCISE 5-5 Mar. 12 Merchandise Inventory.................... 25,000 Accounts Payable........................ 25,000 13 No entry required. 14 Accounts Payable............................. Merchandise Inventory................

2,000 2,000

21 Accounts Payable ($25,000 – $2,000) 23,000 Merchandise Inventory ($23,000 × 2%).............................. 460 Cash.............................................. 22,540

Solutions Manual 5-3 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh

Canadian Edition

BRIEF EXERCISE 5-6 (a) Mar. 16 Accounts Receivable....................... 15,000 Sales.............................................. 15,000 Cost of Goods Sold.......................... Merchandise Inventory................

8,700

17 Freight Out........................................ Cash..............................................

170

18 Sales Returns and Allowances........ Accounts Receivable...................

750

8,700 170 750

25 Cash ($14,250 – $285)...................... 13,965 Sales Discounts ($14,250 × 2%)...... 285 Accounts Receivable ($15,000 – $750)............................ 14,250 (b) Date Mar.16 16 17 18 25

Solutions Manual

Assets Accounts Receivable + $15,000 Merchandise Inventory – $8,700 Cash – $170 Accounts Receivable – $750 Cash + $13,965 Accounts Receivable – $14,250

5-4

Liabilities NE

Owner’s Equity + $15,000

NE – $8,700 NE – $170 NE – $750 NE – $285

Chapter 5

© 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

BRIEF EXERCISE 5-7 Jan. 2 Accounts Receivable....................... 20,000 Sales.............................................. 20,000 Cost of Goods Sold.......................... Merchandise Inventory................

7,900 7,900

4 No entry required. 6 Sales Returns and Allowances........ Accounts Receivable...................

1,500

Merchandise Inventory.................... Cost of Goods Sold.....................

590

1,500

590

Feb. 1 Cash ($20,000 – $1,500)................... 18,500 Accounts Receivable................... 18,500

Solutions Manual 5-5 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

5-2 EXERCISE (a)

3

Cost of goods sold

(b)

8

Subsidiary ledger

(c)

14

(d)

4

Purchase returns

(e)

10

FOB destination

(f)

7

(g)

11

(h)

1

(i)

12

(j)

6

FOB shipping point

(k)

2

Perpetual inventory system

(l)

15

Merchandise inventory

(m)

13

Profit margin

(n)

9

Contra revenue account

Periodic inventory system Sales allowance Gross profit Non-operating activities

Sales discounts

Solutions Manual 5-6 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-3 (a) Mar. 1

Merchandise Inventory ...................... Accounts Payable...........................

9,000

2 Merchandise Inventory....................... Cash.................................................

155

3 Accounts Payable................................ Merchandise Inventory...................

1,000

21

9,000 155 1,000

Merchandise Inventory...................... 13,000 Accounts Payable...........................

13,000

22 (FOB destination point means the seller pays the freight, therefore no entry required here.) 23 Accounts Payable................................ Merchandise Inventory...................

400

30 Accounts Payable ($9,000 – $1,000). . Cash.................................................

8,000

400

31 Accounts Payable ($13,000 – $400). . . 12,600 Merchandise Inventory ($12,600 × 2%)........................... Cash...........................................

8,000

252 12,348

Solutions Manual 5-7 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-3 (Continued) (b) Merchandise Inventory Mar. 1 9,000 2 155 Mar. 3 1,000 21 13,000 23 400 31 252 20,503

Cash payments: March 2 $ 155 March 30 8,000 March 31 12,348 Total cash payments for inventory in March $20,503

Solutions Manual 5-8 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-4 (a) Mar. 1 Accounts Receivable......................... Sales ................................................

9,000

Cost of Goods Sold............................. Merchandise Inventory ..................

3,960

9,000 3,960

2 (FOB shipping point means the buyer pays the freight, therefore no entry required here.) 3 Sales Returns and Allowances .......... Accounts Receivable.....................

1,000

Merchandise Inventory....................... Cost of Goods Sold .......................

440

21

1,000

440

Accounts Receivable.......................... 13,000 Sales ................................................ Cost of Goods Sold............................. Merchandise Inventory ..................

5,720

22 Freight Out........................................... Cash.................................................

170

23 Sales Returns and Allowances .......... Accounts Receivable.....................

400

30 Cash ($9,000 – $1,000)........................ Accounts Receivable......................

8,000

13,000 5,720

170

400

31 Cash...................................................... 12,348 Sales Discounts ($12,600 × 2%)......... 252 Accounts Receivable ($13,000 – $400)

8,000

12,600

Solutions Manual 5-9 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-4 (Continued) (b) Sales ($9,000 + $13,000) Less: Sales returns ($1,000 + $400) Less: Sales discounts Net sales Cost of goods sold ($3,960 + $5,720) Less: Returns to inventory Cost of goods sold Net sales (above) Less: Cost of goods sold (above) Gross profit

$22,000 1,400 252 $20,348 $9,680 440 $9,240 $20,348 9,240 $11,108

Solutions Manual 5-10 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-5 (a) Apr. 5 Merchandise Inventory................ 12,000 Accounts Payable................... 6 Merchandise Inventory................ Cash.........................................

300

8 Accounts Payable........................ Merchandise Inventory...........

1,800

12,000

300 1,800

May 4 Accounts Payable ($12,000 – $1,800)......................... 10,200 Cash.........................................

10,200

(b) Apr. 5 Accounts Receivable................... 12,000 Sales..............................................

12,000

Cost of Goods Sold..................... Merchandise Inventory...........

8,500 8,500

6 No entry required. 8 Sales Returns and Allowances... Accounts Receivable..............

1,800

May 4 Cash ($12,000 – $1,800)............... 10,200 Accounts Receivable..............

1,800 10,200

(c) Gross profit = $1,700 = ($12,000 – $1,800 – $8,500)

Solutions Manual 5-11 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-6 (a) Dec. 3 Accounts Receivable................... 32,000 Sales.........................................

32,000

Cost of Goods Sold..................... 18,000 Merchandise Inventory...........

18,000

4 Freight Out.................................... Cash.........................................

650

8 Sales Returns and Allowances... Accounts Receivable..............

1,800

Merchandise Inventory................ Cost of Goods Sold.................

990

650 1,800

990

13 Cash ($30,200 × 98%).................. 29,596 Sales Discounts ($30,200 × 2%).. 604 Accounts Receivable ($32,000 – $1,800)....................

30,200

(b) Dec. 3 Merchandise Inventory................ 32,000 Accounts Payable...................

32,000

4 No entry required. 8 Accounts Payable........................ Merchandise Inventory...........

1,800

13 Accounts Payable........................ 30,200 Merchandise Inventory ($30,200 × 2%).......................... Cash.........................................

1,800

604 29,596

(c) Merchandise Inventory 6,00 Dec. 1 0 1,800 32,0 Dec. 8 Dec. 3 00 Solutions Manual 5-12 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Dec. 13 Dec. 31

Accounting Principles, Seventh Canadian Edition

604

35,5 96

Solutions Manual 5-13 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.

Weygandt, Kieso, Kimmel, Trenholm, Warren, Novak

Accounting Principles, Seventh Canadian Edition

EXERCISE 5-7 (a) Disagree (b) June 10 Merchandise Inventory................. 4,000 Accounts Payable..................... (a) Disagree (b) June 11 Merchandise Inventory................. 225 Cash........................................... (a) Disagree (b) June 12 Accounts Payable.......................... 200 Merchandise Inventory............. (a) Disagree (b) June 20 Accounts Payable ($4,000 – $200) 3,800 Merchandise Inventory ($3,800 × 2%)............................. Cash ($3,800 × 98%)................. (a) Disagree (b) July 15 Accounts Receivable.................... 9,275 Sales..........................................

(a) (b) (a) (b)

15 Cost of Goods Sold....................... 3,800 Merchandise Inventory............. Disagree July 15 Freight Out..................................... 175 Cash........................................... Disagree July 17 Sales Returns and Allowances. . .. 300 Accounts Receivable................

4,000 225 200

76 3,724 9,275 3,800

175 300

Solutions Manual 5-14 Chapter 5 © 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited....