ACCT 1A&B: Fundamentals of Accounting BCSV Fundamentals of Accounting Part I Accounting for Merchandising Business I. C!C"PT#A$ S%I$$S A. True rue or Fal False se.. Write A if the statement is true otherwise, write B.
1. When merchandise merchandise inventory inventory is purchased with credit credit terms of 2/10, n/60, n/60, the credit credit period is 60 days from date of the invoice. 2. An inventory system in which the business has up-to-date data as to the uantity uantity of !oods on hand is ca""ed a periodic inventory system. #. A deduction deduction a""owed a""owed from from the invoice invoice price price of !oods if paymen paymentt is made within within a speci$ed period of time is ca""ed a trade discount. %. When !oods !oods are shipped shipped under under frei!ht frei!ht terms of &'B shippi shippin! n! point, the the buyer of the !oods pays the frei!ht char!es. (. When a return of merchandise merchandise reuires reuires the buyer to notify notify the se""er se""er of the the reduction reduction in the invoice due to the return, the memorandum sent by the buyer is ca""ed a debit memorandum. 6. )he cost cost of !oods so"d is is determine determined d by addin! the the cost of purchas purchases es to the be!innin! merchandise inventory and subtractin! the endin! merchandise inventory. *. +n a periodic inventory system, system, transportation transportation char!es char!es for merchandise merchandise are are added added to net purchases to determine the cost of !oods purchased. purchased. . +n a perpetua" perpetua" inventory inventory system, transportation char!es char!es are are recorded recorded with with a debit debit to the merchandise inventory account. . )ransportation-+n, &rei!ht-+n, and e"ivery e"ivery pense are a"" a"" the same same account. account. 10. nder a periodic system with inventory inc"uded inc"uded in the c"osin! entry procedure, procedure, the redit co"umn of the +ncome 3tatement co"umns of the wor4 sheet wi"" "i4e"y "i4e"y contain more than revenue account ba"ances. 11. )he purpose of inc"udin! the 5erchandise 5erchandise +nventory account in the c"osin! procedure procedure is to c"ose the be!innin! ba"ance to the +ncome 3ummary account and enter the unso"d ba"ance in the 5erchandise 5erchandise +nventory account periodic system7. 12. )he steps in the accountin! cyc"e are di8erent for a merchandisin! business than they are for a service business. 1#. 'peratin! epenses inc"ude inc"ude !enera" epenses, administrative administrative epenses, epenses, and cost of !oods so"d. 1%. 5erchandise 5erchandise is purchased &'B shippin! point. )he se""er wi"" pay the frei!ht char!es. 1(. 5erchandise 5erchandise purchased on 9une with credit terms terms of 2/10, n/#0, must be paid sooner than with credit terms of n/10 '5. B. Mult Multi ile le Cho Choic ices es.. 3e"ect the "etter of the best answer.
1. :ross :ross pro$t pro$t from from sa"es sa"es is the the di8er di8erence ence betwe between en A. B. . .
;et sa"es sa"es and operatin! operatin! epense epenses s ;et sa"es sa"es and cost cost of !ood !oods s so"d so"d ;et sa"es sa"es and and the cost cost of !oods !oods so"d p"us p"us a"" a"" the epen epenses ses :ross sa"es sa"es "ess "ess the sa"es sa"es discounts discounts and sa"es returns and a""owances a""owances
2. nder the periodi periodic c inventory inventory system, system, the
'n"y cash cash purch purchases ases of merchan merchandise dise inven inventory tory
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ACCT 1A&B: Fundamentals of Accounting BCSV #. Which of the fo""owin! is used to determine the cost of !oods avai"ab"e for sa"e under periodic inventory= A. B. . .
Be!innin! merchandise inventory > purchases > endin! merchandise inventory ndin! merchandise inventory > purchases ? frei!ht char!es Be!innin! merchandise inventory > purchases ? frei!ht char!es Be!innin! merchandise inventory > purchases ? purchases discount > frei!ht char!es
%. nder a perpetua" inventory system, merchandise is purchased on account. )he correct @ourna" entry for this purchase wi"" be a A. B. . .
ebit to purchases and input ta a credit to cash ebit to 5. +nventory and input ta a credit to accounts payab"e ebit to 5. +nventory and input ta a credit to ash ebit to
(. nder a perpetua" inventory system part of the merchandise purchased on account at an ear"ier time is now bein! returned. ;one of the !oods have been paid for. )he correct @ourna" entry for this return wi"" be a A. debit to ash and a credit to
Page 2 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV B. )he be!innin! inventory is etended as a credit in the statement of $nancia" position co"umns. . )he endin! inventory is etended as a debit in the income statement co"umns and as a credit in the statement of $nancia" position co"umns. . )he endin! inventory is etended as a credit in the income statement co"umns and as a debit in the statement of $nancia" position co"umns. 10. )he use of purchase discount account imp"ies that the recorded cost of a purchased inventory is A. +nvoice price B. +nvoice price p"us any purchase discount "ost . +nvoice price "ess the purchase discount ta4en . +nvoice price "ess the purchase discount a""owab"e whether ta4en or not 11. )he use of discount "ost account imp"ies that cost of a purchased inventory is A. +nvoice price B. Eist price . +nvoice price "ess the purchase discount ta4en . +nvoice price "ess the purchase discount a""owab"e whether or not ta4en 12. Which of the fo""owin! shou"d be inc"uded in inventory at the end of reportin! period= A. :oods in transit which were purchased &'B shippin! point B. :oods in transit which were purchased &'B destination . :oods received from another entity on consi!nment . :oods in transit to a customer which were so"d to the customer &'B shippin! point 1#. :oods shipped &'B shippin! point at year-end shou"d ordinari"y be inc"uded in A. )he inventory of the buyer B. )he inventory of the se""er . ;either the inventory of the buyer nor the inventory of se""er . Both the inventory of buyer and of se""er 1%. :oods shipped &'B destination in transit at the end of the year shou"d be inc"uded in the inventory of A. 3e""er B. ommon carrier . Buyer . Ban4 1(. What is the method of accountin! for inventory in which the cost of !oods so"d is recorded each time a sa"e is made= A.
Page 3 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV 1*. An entry debitin! inventory and creditin! cost of !oods so"d wou"d be made when A. 5erchandise is so"d and the periodic inventory method is used. B. 5erchandise is so"d and the perpetua" inventory method is used. . 5erchandise is returned and the perpetua" inventory method is used. . 5erchandise is returned and the periodic inventory method is used. 1. A discount !iven to a customer for purchasin! a "ar!e vo"ume of merchandise is typica""y referred to as A. )rade discount B. Fuantity discount . 3iGe discount . ash discount 1. Which of the fo""owin! terms represents the deduction from the invoice price of purchased !oods !ranted by the supp"ier for ear"y payment= A. 3a"es discount B.
ACCT 1A&B: Fundamentals of Accounting BCSV B. ;et income was !reater than !ross pro$t. . )he cost of !oods avai"ab"e for sa"e was sma""er than cost of !oods so"d. . )he cost of !oods so"d as sma""er than net purchases. II. CMP#TATI!A$ A!' A!A$(TICA$ S%I$$S 3upp"y the answer. Pro)lem 1: Iision ompany occurred the fo""owin! transactions durin! the month of 5ay of the current year
5ay 6
3o"d merchandise on account, "ist price < (00,000. )erms 10 (/1(, n/#0, &'B estination, frei!ht co""ect, < 2(,000.
5ay
3o"d !oods for cash, < #00,000. )ransportation cost is < #,000, &'B 3hippin! point, frei!ht co""ect.
5ay 10 5ay 12 5ay 21
3o"d < 600,000. )erms 20, 10 (/10, n/#0. &'B estination, frei!ht prepaid, < 60,000. 3o"d < %00,000. )erms #/10, n/#0 &'B 3hippin! point, frei!ht prepaid, < %,000. o""ected sa"es for 5ay 6.
isre!ard IA). *i+e the correct amount of the follo,ing items: 1. Total net sales. -. Total accounts recei+a)le. . Total freight out. /. Total sales discount. 0. Cash collected from Ma 2 sale. Pro)lem -: 3)5 o., a IA) ? re!istered company, en!a!ed in the fo""owin! transactions durin! 3eptember 201# )he o. is usin! the perpetua" inventory system7
/#
/11
3o"d merchandise on account, terms &'B estination, # / 10 n/2(. :oods costin! <20,#00 were so"d at <2,000. &rei!ht paid amounted to <00.
/1(
Ceceived the payment for !oods so"d on /11.
/1*
Assumin! no other transactions re"evant to inventoriesJ 3e4uired: Comute for the 2. Peso amount of in+entor on hand as of Set. 5. 6. Amount of VAT aa)le. 7. Purchase discount a+ailed. 8. Amount of cash aid on Setem)er 16. 15.*ross ro9t. 11.!et income.
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ACCT 1A&B: Fundamentals of Accounting BCSV Pro)lem : Bri o. so"d merchandise to An o. on account, <(,*60, terms 2/1(, n/#0 &'B estination. Bri prepaid the frei!ht in the amount of <#,000. )he cost of the merchandise so"d is <(*,00. Bri o. issued a credit memorandum for <2(,% for merchandise returned and "ater received the amount due within the discount period. )he cost of the defective merchandise is <21,220. 3e4uired: Comute for the 1-.Amount recei+ed from the customer. 1.!et sales. 1/.*ross ro9t. 10.!et ro9t. Pro)lem /: K-on ompany re!u"ar"y buys merchandise from L-on ompany and is a""owed trade discounts of 1(M and 10M from the "ist price. -on made a purchase on 5ay 20, 201# and received an invoice with a "ist price of 1(0,000, a frei!ht char!e of <2,(00, and payment terms of net %( days.
+!nore IA). 3e4uired: Comute for the 12.Total trade discounts to )e recorded in the )oos of (;Con. 16.Purchases. Pro)lem 0: Kem o. purchased an item of merchandise uoted and "isted at <210,000 under the fo""owin! terms trade discounts of 1(M, 10M, (M, #/12 n/#0. 3e4uired: Comute for the 17.Purchases under net method. 18.Cash ament< if settlement is made ,ithin the discount eriod. -5.Purchase discounts lost under net method< if settlement is made outside the discount eriod. Pro)lem 2:
<#,20,000 00,000 0,000 2*,000
Account ba"ances prior to ad@ustments be"ow 5erchandise +nventory <*0%,6*0 Accounts Ceceivab"e <606,(12 Accounts
ACCT 1A&B: Fundamentals of Accounting BCSV 'utput )a
<*1#,%12
A. 5ort uses the periodic inventory system. A physica" count revea"s <*0%,6*0 of inventory on hand at ecember #1, 201#. B. ;ot inc"uded in the physica" count of inventory is <#1,260 cost of merchandise purchased on ecember 1( from 3hende"Gare supp"iers. )his merchandise was shipped &'B 3hippin! point on ecember 2 and arrived in 9anuary. )he invoice arrived and was recorded on ecember #1. . +nc"uded in inventory is merchandise so"d to Arach on ecember #0, &'B estination. )he merchandise was shipped after it was counted. )he invoice was prepared and recorded as a sa"e on account for <#,%00 IA) ? ec"usive7 on ecember #1. )he merchandise cost <22,0(0, and Arach received it on 9anuary #. . +nc"uded in inventory was merchandise received from Brood on ecember #1 with an invoice price of <(2,(16.0. the merchandise was shipped &'B estination. )he invoice, which has not yet arrived, has not been recorded. . ;ot inc"uded in inventory is <2(,620 cost of merchandise purchased from Eich o. this merchandise was received on ecember #1 after the inventory had been counted. )he invoice was received and recorded on ecember #0. &.
+nc"uded in inventory was <#1,#1% worth of inventory he"d by 5ort on consi!nment from 9a4iro orp.
:. +nc"uded in inventory is merchandise so"d to Cy"ai &'B 3hippin! point. )his merchandise was shipped after it was counted. )he invoice was prepared and recorded as a sa"e for <6#,(0% on ecember #1. )he cost of this merchandise was <#%,(60, and Cy"ai received the merchandise on 9anuary (. N. c"uded from inventory was a carton "abe"ed O<"ease accept for creditP. )his carton contains merchandise costin! <%,(00 which had been so"d to a customer for <,*#6. ;o entry had been made to the boo4s to reQect the return, but none of the returned merchandise seemed dama!ed. 3e4uired: Comute for the correct )alance of -.Merchandise in+entor< 'ecem)er 1. -/.Accounts recei+a)le< 'ecem)er 1 -0.Accounts aa)le< 'ecem)er 1 -2.Sales -6.VAT aa)le Pro)lem 7: +n testin! the sa"es cut-o8 for the +nsu"to orporation in connection with an audit for the year ended 'ctober #1, 201#, you $nd the fo""owin! information
A physica" inventory was ta4en as of the c"ose of business on 'ctober #1, 201#. A"" customers are within a # ?day de"ivery area of the companyHs p"ant. )he unad@usted ba"ances of 3a"es, 'utput ta, and +nventories are <*,(00,000, <00,000 and <##0,000 respective"y. 3a"es and costs are IA) ec"usive. In+oice >
FB terms:
2%601
estination
'ate Shied: 'ct. 20
'ate recorded: 'ct. #1
Sales:
Cost:
< #,000
< 2,*00 Page 7 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV ##*02 ##*06 %1*06 %2666 %(112 %( (*60 *#%22 2%##
3hippin! pt. 3hippin! pt. estination estination 3hippin! pt. 3hippin! pt. estination 3hippin! pt. estination
'ct. #1 'ct. 2( 'ct. #1 'ct. #1 ;ov. 2 ;ov. ( 'ct. 2( ;ov. % ;ov. (
;ov. 2 'ct. #1 'ct. 2 ;ov. 2 'ct. 2# ;ov. 6 ;ov. # 'ct. #1 ;ov. 2
*,(00 (,%00 12,600 2*,600 1,(00 22,(00 11,*00 2(,00 1(,000
6,000 #,600 ,#00 2%,000 1(,#00 1*,%00 6,000 2%,600 12,000
3e4uired: )ased on the follo,ing information< comute the cto)er 1< -51< ad?usted )alances of the follo,ing accounts: -7.Sales -8.utut Ta= 5.In+entories Pro)lem 8: R< ompany prepares month"y income statements. A physica" inventory is ta4en on"y at year-end. A"" sa"es are made on account. )he rate of mar4up on cost is (0M. )he fo""owin! information re"ates to the month of 9une
Accounts Ceceivab"e, 9une 1 Accounts receivab"e, 9une #0 o""ection of accounts receivab"e durin! 9une +nventory, 9une 1
<102,000 1(#,000 2((,000 1#,600 16#,200
isre!ard the e8ect of IA). 3e4uired: comute for 1.Cost of sales -.*ross margin .In+entor< @une 5 Pro)lem 15: 'n the eve of 9une 1(, 201#, a $re destroyed the entire merchandise inventory of pic 5erchandisin!. )he merchandise was not insured with any insurance company. )he fo""owin! information was !athered
+nventory, 9anuary 1
<2(0,000 1,(00,000 2,000,000 2(M
isre!ard the e8ect of IA). 3e4uired: comute for /.Cost of sales 0.*ross ro9t 2.In+entor loss Pro)lem 11: )he ba"ances of se"ected accounts ta4en from the ecember #1, 2012 statement of $nancia" position of 9avert, +nc. are as fo""ows
Accounts Ceceivab"e A""owance for doubtfu" accounts
< ##*,000 12,000
)he fo""owin! transactions a8ectin! accounts receivab"e occurred durin! the year ended ecember #1, 201# isre!ard the e8ect of IA)7 Page 8 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV 3a"es a"" on account, terms 2/10, 1/1(, n/%(7 ash received from customers &rom customers payin! within the 10-day discount period &rom customers payin! within the 1(-day discount period &rom recovery of accounts written o8 &rom customers payin! beyond the discount period Accounts receivab"e written o8 as worth"ess redit memoranda for sa"es returns
< 1,(00,000 1,600,000 2,000 %(,000 #,000 = 11,000 6,000
Based on assessment of co""ectabi"ity of the accounts, impairment "oss reco!niGed on accounts receivab"e is <1(,000. 3e4uired: Comute for the 6.Total net sales. 7.Amortied cost of Accounts recei+a)le. Pro)lem 1-: Io@ee o. purchased !oods from 9oGa on credit for <**2,00 terms &'B estination %/10 n/#0. &rei!ht cost is <1(,000 and Io@ee advanced the payment of frei!ht to the shippin! company. After # days, Io@ee received credit memo from 9oGa for !oods returned for <101,#60. Io@ee paid the ba"ance within the discount period. 3e4uired: Comute for 8.The amount of cash aid ) Vo?ee. Pro)lem 1: Cepaa so"d !oods to Si!4o for cash with a cata"o!ue price of <#02,000 and with trade discount of (M, M, 12M. Cepaa o. is a IA)-re!istered business. 3a"es is IA) ? ec"usive. 3e4uired: Comute for the /5.Amount due from igo. /1.Sales Pro)lem 1/: )he fo""owin! information is avai"ab"e for 3aGGu ompany re"atin! to 201# operations isre!ard the e8ect of IA)7
Accounts Ceceivab"e, 9anuary 1 Accounts Ceceivab"e o""ected ash 3a"es +nventory, 9anuary 1 +nventory, ecember #1
%,000,000 ,%00,000 2,000,000 %,00,000 %,%00,000 ,000,000 %,200,000
3e4uired: /-.hat is the )alance of accounts recei+a)le on 'ecem)er 1< -51D /.Total salesD //.Cost of goods soldD Pro)lem 10: )hrust ompany reports operatin! epenses in two cate!ories distribution and !enera" T administrative. )he ad@usted tria" ba"ance on ecember #1, 201# inc"uded the fo""owin! epense and "oss accounts
Accountin! and Ee!a" fees Advertisin!
1,200,000 1,(00,000 Page 9 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV &rei!ht out +nterest Eoss on sa"e of uipment 'UcersH sa"aries Cent for oUce space 3a"es sa"aries and commissions
00,000 *00,000 #00,000 2,2(0,000 2,200,000 1,%00,000
V of the rented premises is occupied by the sa"es department. 3e4uired: /0.hat amount should )e reorted as total distri)ution costsD Pro)lem 12: )he fo""owin! costs were incurred by oha! ompany durin! the current year
Accountin! and Ee!a" fees &rei!ht in &rei!ht out 'UcersH sa"aries +nsurance 3a"es representative sa"aries
2(0,000 1,*(0,000 1,600,000 1,(00,000 (0,000 2,1(0,000
3e4uired: /2.hat amount should )e r eorted as general and administrati+e e=ensesD Pro)lem 16: )he fo""owin! information is avai"ab"e from Iast o"d ompanyHs accountin! records for the current year
(,#00,000 100,000 1,600,000 2,1(0,000 %00,000
3e4uired: /6.hat is the cost of sales for the current earD Pro)lem 17: )he fo""owin! information is avai"ab"e for &ohossi ompany for the current year
isbursements for purchases +ncrease in trade accounts payab"e ecrease in inventory
(,00,000 (00,000 200,000
3e4uired: /7.hat is the cost of sales for the current earD Pro)lem 18: )he fo""owin! information is avai"ab"e from the records of Ba@u ompany for the current year
Be!innin! +nventory &rei!ht in
%00,000 #00,000 00,000 (00,000 1,2(0,000 Page 10 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV 3a"es discounts
2(0,000
)he cost of !oods so"d is si times the se""in! epenses. 3e4uired: /8.hat is the amount of *ross PurchasesD 05.hat is the amount of Cost of *oods PurchasedD Pro)lem -5: B"iss ompany is usin! the periodic inventory system. &or the year, its tota" purchases amounted to < 2(0,000. +ts unso"d merchandise at the end of the year has a cost of < (,000 which is 0M of its be!innin! inventory. 01.BlissE cost of sales for the ear isD Pro)lem -1: )he fo""owin! data pertain to the two-year operation of &aith Business
3a"es
Lear 1 < 200,000 2(0,000 0,000
Lear 2 < 2(0,000 1(0,000 %0,000
0-.hat is the )usinessE gross ro9t on ear 1D 0.hat is the )usinessE gross ro9t on ear -D Pro)lem --: )he cost of sa"e is < 2(0,000. )ota" purchases amounted to < #00,000 which increased the tota" !oods avai"ab"e for sa"e to < #10,000. 0/.o, much is the ending in+entorD Pro)lem -: )he !ross pro$t is < 100,000 !oods avai"ab"e for sa"e, < 1,100,000 be!innin! inventory, < 100,000 purchases, < 1,000,000 and sa"es, < 1,000,000. 00.o, much is the ending in+entorD “Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers you cannot be successful or happy.” Norman Vincent Peale ~
Suggested %e I. A. 1. 2. #. %. (.
C!C"PT#A$ S%I$$S True or False A B B A A
. B 10. A 11. A 12. B 1#. B Page 11 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV 6. A *. A . A B. Multile Choice 1. B 2. #. %. B (. 6. *. . . 10. A 11. 12. A 1#. A
1%. B 1(. A
1%. A 1(. 16. 1*. 1. A 1. B 20. 21. A 22. 2#. B 2%. 2(.
II. CMP#TATI!A$ A!' A!A$(TICA$ S%I$$S 1. < 1,60*,(00 #0. <#6#,#00 2. < %,000 #1. <20%,000 #. < (,000 #2. <102,000 %. < 22,(00 ##. <1%2,00 (. < %02,(00 #%. <1,600,000 6. < *,260 #(. <%00,000 *. < 20# or < 10 #6. <1(0,000 . < %0 #*. < 1,%*1,000 . < #0,26* or < #0,#0 #. <11,000 10. < #,(0 #. <62,(2 or < 6#2,%60 11. < #,0(0 %0. <260,1%* 12. < 6,#0 or < 6,(#0 %1. <2#2,2*% 1#. <61,0(% %2. <6,200,000 1%. <2%,#*% %#. <12,600,000 1(. <21,#*% %%. <,%00,000 16. 0 %(. <%,00,000 1*. < 11%,*(0 %6. <2,600,000 1. < 1%,0# %*. <%,6(0,000 1. < 16(,0% %. <6,(00,000 20. < %,(* %. <,(00,000 21. <%,*60 or %2,000 (0. <*,600,000 22. <6,000 (1. < 2(1,2(0 2#. <*00,1*6 (2. < %0,000 2%. <((%,*6 (#. < (0,000 2(. <1,216,222 (%. < 60,000 26. <2,1(6,*00 ((. < 200,000 2*. <10,%16 Some items have two answers. This is due to the VAT on Sales discounts. 2. <*,%61,#00 Based on your book, Sales discount can 2. <(,#(6
decrease Output tax. Based on Tax code, Sales discounts based on future events is not allowed to reduce Output Page 12 of 13
ACCT 1A&B: Fundamentals of Accounting BCSV VAT. Ask your professors whats their stand about this.
Page 13 of 13
