Connect - another Financial Accounting, Chapter 4 (continue)

14.

A company reports the following sales-related information.
 

Sales, gross	$	205,000		Sales returns and allowances	$	12,000
Sales discounts		4,100		Sales salaries expense		10,100

Prepare the net sales portion only of this company’s multiple-step income statement.

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15.

ProBuilder has the following June 30, 2016, fiscal-year-end unadjusted balances: Allowance for Sales Discounts, $0; and Accounts Receivable, $11,900. Of the $11,900 of receivables, $2,950 are within a 2% discount period, meaning that it expects buyers to take $59 in future discounts arising from this period’s sales.
 

a. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future sales discounts.

No	Date	General Journal	Debit	Credit
1	June 30	Sales discountsselected answer correct	59selected answer correct	not attempted
		Allowance for sale discountsselected answer correct	not attempted	59selected answer correct

b. Assume the same facts above and that there is a $14 fiscal-year-end unadjusted credit balance in the Allowance for Sales Discounts. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future sales discounts.

No	Date	General Journal	Debit	Credit
1	June 30	Sales discountsselected answer correct	45selected answer correct	not attempted
		Allowance for sale discountsselected answer correct	not attempted	45selected answer correct

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16.

ProBuilder reports merchandise sales of $84,000 and cost of merchandise sales of $29,400 in its first year of operations ending June 30, 2016. It makes fiscal-year-end adjusting entries for estimated future returns and allowances equal to 1% of sales, or $840, and 1% of cost of sales, or $294.

a. & b. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future returns and allowances related to sales and cost of sales.

No	Date	General Journal	Debit	Credit
1	June 30	Sales returns and allowancesselected answer correct	840selected answer correct	not attempted
		Sales refund payableselected answer correct	not attempted	840selected answer correct
2	June 30	Inventory returns estimatedselected answer correct	294selected answer correct	not attempted
		Cost of goods soldselected answer correct	not attempted	294selected answer correct

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17.

Prepare journal entries to record the following merchandising transactions of Lowe's, which uses the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Aron.) 

Aug.		1		Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
Aug.		5		Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $4,000.
Aug.		8		Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8.
Aug.		9		Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp.
Aug.		10		Baird returned merchandise from the August 5 sale that had cost Lowe's $400 and was sold for $600. The merchandise was restored to inventory.
Aug.		12		After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe's received a credit memorandum from Waters granting a price reduction of $400 off the $5,400 of goods purchased.
Aug.		14		At Aron's request, Lowe's paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron.
Aug.		15		Received balance due from Baird Corp. for the August 5 sale less the return on August 10.
Aug.		18		Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12.
Aug.		19		Sold merchandise to Tux Co. for $4,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,400.
Aug.		22		Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe's sent Tux a $500 credit memorandum toward the $4,800 invoice to resolve the issue.
Aug.		29		Received Tux's cash payment for the amount due from the August 19 sale less the price allowance from August 22.
Aug.		30		Paid Aron Company the amount due from the August 1 purchase.

Journalize the merchandising transactions. The General Ledger, trial balance, and schedules of accounts receivable and accounts payable will be updated based on your entries.

No	Date	Account Title	Debit	Credit
1	Aug 01	Merchandise inventoryselected answer correct	7,500selected answer correct	not attempted
		Accounts payable - Aronselected answer correct	not attempted	7,500selected answer correct
2	Aug 05	Accounts receivable - Bairdselected answer correct	5,200selected answer correct	not attempted
		Salesselected answer correct	not attempted	5,200selected answer correct
3	Aug 05	Cost of goods soldselected answer correct	4,000selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	4,000selected answer correct
4	Aug 08	Merchandise inventoryselected answer correct	5,400selected answer correct	not attempted
		Accounts payable - Watersselected answer correct	not attempted	5,400selected answer correct
5	Aug 09	Delivery expenseselected answer correct	125selected answer correct	not attempted
		Cashselected answer correct	not attempted	125selected answer correct
6	Aug 10	Sales returns and allowancesselected answer correct	600selected answer correct	not attempted
		Accounts receivable - Bairdselected answer correct	not attempted	600selected answer correct
7	Aug 10	Merchandise inventoryselected answer correct	400selected answer correct	not attempted
		Cost of goods soldselected answer correct	not attempted	400selected answer correct
8	Aug 12	Accounts payable - Watersselected answer correct	400selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	400selected answer correct
9	Aug 14	Accounts payable - Aronselected answer correct	200selected answer correct	not attempted
		Cashselected answer correct	not attempted	200selected answer correct
10	Aug 15	Cashselected answer correct	4,508selected answer correct	not attempted
		Sales discountsselected answer correct	92selected answer correct	not attempted
		Accounts receivable - Bairdselected answer correct	not attempted	4,600selected answer correct
11	Aug 18	Accounts payable - Watersselected answer correct	5,000selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	50selected answer correct
		Cashselected answer correct	not attempted	4,950selected answer correct
12	Aug 19	Accounts receivable - Tuxselected answer correct	4,800selected answer correct	not attempted
		Salesselected answer correct	not attempted	4,800selected answer correct
13	Aug 19	Cost of goods soldselected answer correct	2,400selected answer correct	not attempted
		Merchandise inventoryselected answer correct	not attempted	2,400selected answer correct
14	Aug 22	Sales returns and allowancesselected answer correct	500selected answer correct	not attempted
		Accounts receivable - Tuxselected answer correct	not attempted	500selected answer correct
15	Aug 29	Cashselected answer correct	4,300selected answer correct	not attempted
		Accounts receivable - Tuxselected answer correct	not attempted	4,300selected answer correct
16	Aug 30	Accounts payable - Aronselected answer correct	7,300selected answer correct	not attempted
		Cashselected answer correct	not attempted	7,300selected answer correct

Prepare a multiple-step income statement through the calculation of gross profit.

Lowe’s Company Income Statement For the Month Ended August 31, 2017 Salesselected answer correct $10,000 Sales returns and allowancesselected answer correct $1,100not attempted Sales discountsselected answer correct 92not attempted (1,192) Net salesselected answer correct 8,808 Cost of goods soldselected answer correct 6,000 Gross profitselected answer correct 2,808 Operating expenses: Delivery expense 125 Net income $2,683

For each transaction, indicate the impact each item had on income and the dollar amount of the change in income, if any. Input decreases to net income as negative values. Upon completion, compare the amount of income with the amount reported on the partial income statement.

Impact on income Increase (decrease) to income Aug. 1) Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. No impact on incomeselected answer correct 0selected answer correct Aug. 5) Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. Increases net incomeselected answer correct $5,200selected answer correct Aug. 5) The merchandise sold to Baird had cost $4,000. Decreases net incomeselected answer correct (4,000)selected answer correct Aug. 8) Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. No impact on incomeselected answer correct 0selected answer correct Aug. 9) Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp. Decreases net incomeselected answer correct (125)selected answer correct Aug. 10) Baird returned merchandise from the August 5 sale that had sold for $600. Decreases net incomeselected answer correct (600)selected answer correct Aug. 10) The cost of the merchandise returned by Lowe’s was $400. The merchandise was restored to inventory. Increases net incomeselected answer correct 400selected answer correct Aug. 12) After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of $400 off the $5,400 of goods purchased. No impact on incomeselected answer correct 0selected answer correct Aug. 14) At Aron’s request, Lowe’s paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron. No impact on incomeselected answer correct 0selected answer correct Aug. 15) Received balance due from Baird Corp. for the August 5 sale less the return on August 10. Decreases net incomeselected answer correct (92)selected answer correct Aug. 18) Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. No impact on incomeselected answer correct 0selected answer correct Aug. 19) Sold merchandise to Tux Co. for $4,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. Increases net incomeselected answer correct 4,800selected answer correct Aug. 19) The cost of the merchandise sold merchandise to Tux was $2,400. Decreases net incomeselected answer correct (2,400)selected answer correct Aug. 22) Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $500 credit memorandum toward the $4,800 invoice to resolve the issue. Decreases net incomeselected answer correct (500)selected answer correct Aug. 29) Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22. No impact on incomeselected answer correct 0selected answer correct Aug. 30) Paid Aron Company the amount due from the August 1 purchase. No impact on incomeselected answer correct 0selected answer correct Total income $2,683