Merchandising Accounting

1
6
Accounting for
Merchandising
Businesses
1
2
After studying this chapter, you should

be able to:
1. Distinguish between the activities and
financial statements of service and
merchandising businesses.
2. Describe and illustrate the financial
statements of a merchandising
business.
2
3
After studying this chapter, you should

be able to:
3. Describe and illustrate the accounting for
merchandise transactions including:
sale of merchandise
purchase of merchandise
transportation costs, sales taxes, trade discounts
dual nature of merchandising transactions.
4. Describe the adjusting and closing process
for a merchandising business. 3
4
6-1
Objective 1
Distinguish between the
activities and financial
statements of service and
merchandising businesses.
4
5
6-1
Service Business
Fees earned $XXX
Operating expenses –XXX
Net income $XXX
5
6
6-1
Merchandising Business
Sales $XXX
Cost of Merchandise Sold –XXX
Gross Profit $XXX
Operating Expenses –XXX
Net Income $XXX
6
7
6-1
When merchandise is sold, the

revenue is reported as sales, and
its cost is recognized as an
expense called cost of
merchandise sold.
7
8
6-1
The cost of merchandise sold is

subtracted from sales to arrive at
gross profit. This amount is
called gross profit because it is
the profit before deducting the
operating expenses.
8
9
6-1
Merchandise on hand (not

sold) at the end of an
accounting period is called
merchandise inventory.
9
10
1-2
6-1
Example Exercise 6-1

On August 25, Gallatin Repair Service extended an offer of
During
$125,000theforcurrent year,
land that had merchandise
been priced forissale
soldatfor $250,000
$150,000. On
cash and for
September $975,000
3, Gallatin on account.
Repair The costthe
Service accepted ofseller’s
the
merchandise
counteroffer ofsold is $735,000.
$137,000. What20,
On October is the
theland
amount of the
was assessed
gross profit?
at a value of $98,000 for property tax purposes. On December 4,
Gallatin Repair Service was offered $160,000 for the land by a
Follow Myretail
national Example 6-1what value should the land be recorded
chain. At
in Gallatin Repair Service’s records?
The gross profit is $490,000 ($250,000 + $975,000 –
$735,000).
Follow My Example 1-1
$137,000. Under the cost concept, the land should be recorded at
the cost to Gallatin Repair Service. 10
10
For Practice: PE 6-1A, PE 6-1B 31
11
6-1
1111
12
6-2
Objective 2
Describe and illustrate the
financial statements of a
merchandising business.
12
13
Multiple-Step Income Statement 6-2
The multiple-step
income statement
contains several sections,
subsections, and
subtotals.
13
14
6-2
The Sales account

provides the total amount
charged to customers for
merchandise sold,
including cash sales and
sales on account.
14
15
6-2
Sales returns and

allowances are granted by
the seller to customers for
damaged or defective
merchandise.
15
16
6-2
Sales discounts are granted

by the seller to customers
for early payment of
amounts owed.
16
17
6-2
Net sales is determined by

subtracting sales returns
and allowances and sales
discounts from sales.
17
18
Multiple-Step Income Statement 6-2
NetSolutions
Income Statement
For the Year Ended December 31, 2009
Revenue from sales:

Sales $720,185
Less: Sales returns and allowances $ 6,140
Sales discounts 5,790 11,930
Net sales $708,255
Cost of merchandise sold 525,305
Gross profit $182,950
(Continued) 18
18
19
Operating expenses:
Selling expenses:
Sales salaries expense $53,430
Advertising expense 10,860
Depr. Expense–store equipment 3,100
Delivery Expense 2,800
Miscellaneous selling expense 630
Total selling expenses $ 70,820
Administrative expenses:
Office salaries expense $21,020
Rent expense 8,100
Depr. expense–office equipment 2,490
Insurance expense 1,910
Office supplies expense 610
Misc. administrative expense 760
Total admin. expenses 34,890
Total operating expenses 105,710
Income from operations (Continued) 19
$ 77,240
19
20
6-2
Other income and expenses:

Rent revenue $ 600
Interest expense (2,440) (1,840)
Net income $75,400
(Concluded) 20
20
21
6-2
Cost of merchandise sold

was discussed earlier. It is
the cost of the merchandise
sold to customers.
21
22
6-2
As we discussed in Slide 16,

sellers may offer customers
sales discounts for early
payment of their bills. From
the buyer’s perspective, such
discounts are referred to as
purchase discounts.
22
23
6-2
The buyer may return merchandise

to the seller (a purchase return),
or the buyer may receive a
reduction in the initial price at
which the merchandise was
purchased (a purchase allowance).
23
24
Cost of Merchandise 6-2

Sold
24
24
25
Single-Step Income Statement 6-2
An alternative form of income

statement is the single-step
income statement. As shown in
the next slide, the income
statement for NetSolutions
deducts the total of all expenses
in one step from the total of all
revenues.
25
26
Exhibit 3: Single-Step Income Statement 6-2
NetSolutions
Income Statement
Revenues:
Net sales $708,255
Rent revenue 600
Total revenues $708,855
Expenses:
Cost of merchandise sold $525,305
Selling expenses 70,820
Administrative expenses 34,890
Interest expense 2,440
Total expenses 633,455
Net income $ 75,400
26
26
27
Exhibit 4: Statement of Owner’s Equity 6-2
NetSolutions
Statement of Owner’s Equity
Chris Clark, capital, 1/1/09 $153,800

Net income for year $75,400
Less withdrawals 18,000
Increase in owner’s equity 57,400
Chris Clark, capital, 12/31/09 $211,200
27
27
28
Exhibit 5: Report Form of Balance Sheet 6-2
NetSolutions
Balance Sheet
December 31, 2009
Assets
Current assets:
Cash $52,950
Accounts receivable 91,080
Merchandise inventory 62,150
Office supplies 480
Prepaid insurance 2,650
Total current assets $209,310
(Continued) 28
28
29
Property, plant, and equip.:

Land $20,000
Store equipment $27,100
Less accumulated
depreciation 5,700 21,400
Office equipment $15,570
Less accumulated
depreciation 4,720 10,850
Total property, plant,
and equipment 52,250
Total assets $261,560
(Continued) 29
29
30
Liabilities
Current liabilities:
Accounts payable $22,420
Note payable (current portion) 5,000
Salaries payable 1,140
Unearned rent 1,800
Total current liabilities $ 30,360
Long-term liabilities:
Note payable (final pmt. due 2017) 20,000
Total liabilities $ 50,360
Owner’s Equity
Chris Clark, capital 211,200
Total liabilities and owner’s equity $261,560 30
30
(Concluded)
31
6-2
Based upon the following data, determine the cost of

merchandise sold for May. Use the format seen in
Exhibit 2.
Merchandise Inventory, May 1 $121,200
Merchandise Inventory, May 31 142,000
Purchases 985,000
Purchases Returns and Allowances 23,500
Purchases Discounts 21,000
Transportation In 11,300
31
31
32
6-2
Merchandise Inventory, May 1 $ 121,200

Purchases $985,000
Less: Purchases returns and allowances $23,500
Purchases discounts 21,000 44,500
Net purchases $940,500
Add transportation in 11,300
Cost of merchandise purchased 951,800
Merchandise available for sale $1,073,000
Less merchandise inventory, May 31 142,000
Cost of merchandise sold $ 931,000
32
32
For Practice: PE 6-2A, PE 6-2B
33
6-3
Objective 3
Describe and illustrate the accounting
for merchandise transactions including:
sale of merchandise; purchase of
merchandise; transportation costs, sales
taxes, trade discounts; dual nature of
merchandise transactions.
33
34
Cash Sales 6-3
On January 3, NetSolutions sold

$1,800 of merchandise for cash.
34
34
35
Cash Sales (continued) 6-3
Using a perpetual inventory, the $1,200

cost of the inventory must be recorded.
35
35
36
Credit Card Sales 6-3
At the end of the month, $48 was

sent to pay the service charge on
credit card sales.
36
36
37
Sales on Account Using a Perpetual 6-3

Inventory
Jan. 12 Accounts Receivable—Sims Co. 510 00
Sales 510 00
Invoice No. 7172
12 Cost of Merchandise Sold 280 00

Merchandise Inventory 280 00
Cost of merchandise sold on
Invoice No. 7172.
On January 12, NetSolutions sold Sims Company

merchandise on account, $510. The cost of the
37
37
merchandise to the seller was $280.
38
Sales Discounts 6-3
The terms for when payments for

merchandise are to be made, agreed
on by the buyer and the seller, are
called credit terms. If buyer is
allowed an amount of time to pay, it
is known as the credit period.
38
39
Credit Terms 6-3
If invoice is
paid within Invoice for
$1,500
10 days of
Terms:
invoice date 2/10, n/30
$1,470 paid
($1,500 less a
2% discount) 39
39
40
6-3
If invoice is
Invoice for NOT paid
$1,500 within 10
Terms: days of
2/10, n/30 invoice date
Full amount ($1,500)
is due within 30 days
of invoice date 40
40
41
Sales Discounts 6-3
Jan. 22 Cash 1 470 00

Sales Discounts 30 00
Accounts Receivable–Omega Tech. 1 500 00
Collection of Invoice No.
106-8, less 2% discount.
On January 22, NetSolutions receives the

amount due, less the 2 percent discount.
41
41
42
6-3
Jan. 13 Sales Returns and Allowances 225 00

Accounts Receivable—Krier Co. 225 00
Credit Memo No. 32
13 Merchandise Inventory 140 00

Cost of Goods Sold 140 00
Cost of merchandise returned.
Credit Memo No. 32.
On January 13, issued Credit Memo 32 to Krier

Company for merchandise returned to
NetSolutions. Selling price, $225; cost to 42
42
NetSolutions, $140.
43
1-2
6-3

Journalize the following merchandise transactions:
a. Sold merchandise on account, $7,500 with terms of
2/10, n/30. The cost of the merchandise sold was
$5,625.
b. Received payment less the discount.
43
43
44
6-3
a. Accounts Receivable 7,500

Sales 7,500
Cost of Merchandise Sold 5,625
Merchandise Inventory 5,625
b. Cash 7,350
Sales Discounts 150
Accounts Receivable 7,500
44
44
45
Purchase Transactions (Perpetual 6-3

Inventory)
JOURNAL PAGE 24
Post.
Date Description Ref. Dr Cr.
2009
Jan. 3 Merchandise Inventory 2 510 00
Cash 2 510 00
Purchased inventory from
Bowen Co.
On January 3, NetSolutions purchased merchandise

for cash from Alden Company, $2,510.
45
45
46
6-3
Jan. 4 Merchandise Inventory 9 250 00

Accounts Payable—Thomas Corp. 9 250 00
Purchased inventory on
account.
On January 4, NetSolutions purchased

merchandise on account from Thomas
Corporation, $9,250.
46
46
47
Purchases Discounts 6-3
Alpha Technologies issues

an invoice for $3,000 to
NetSolutions dated March
12, with terms 2/10, n/30.
47
48
6-3
NetSolutions borrows cash at an annual interest

rate of 6%. Should the firm borrow cash to pay
the invoice within the discount period?
YES
Discount of 2% on $3,000 $60.00
Interest for 20 days at the rate
of 6% on $2,940 – 9.80
Savings from borrowing $50.20
48
49
Purchase Transactions (Perpetual 6-3

Inventory)
Mar. 12 Merchandise Inventory 3 000 00

Accounts Payable—Alpha Tech. 3 000 00
Purchased inventory on
account.
On March 12, NetSolutions purchased

merchandise on account from Alpha
Technologies, $3,000.
49
49
50
6-3
Mar. 22 Accounts Payable—Alpha Technol. 3 000 00

Cash 2 940 00
Paid Alpha Technologies for
March 12 purchase.
If payment is made by March 22, NetSolutions

records the discount as a reduction in cost. Notice
that Merchandise Inventory is credited because
NetSolutions maintains a perpetual inventory.
50
50
51
6-3
Apr. 11 Accounts Payable—Alpha Technol. 3 000 00

Cash 3 000 00
Paid Alpha Technologies for
March 12 purchase.
If NetSolutions does not pay the invoice until

April 11, it would pay the full amount.
51
51
52
Purchases Return 6-3
A purchases return involves actually

returning merchandise that is
damaged or does not meet the
specifications of the order.
52
53
Purchases Allowance 6-3
When the defective or incorrect

merchandise is kept by the
buyer and the vendor makes a
price adjustment, this is a
purchases allowance.
53
54
6-3
NetSolutions receives the delivery

from Maxim Systems and
determines that $900 of the items
are not the merchandise ordered.
Debit memorandum #18 (also
called a debit memo) is issued to
Maxim Systems.
54
55
6-3
Mar. 7 Accounts Payable—Maxim Systems 900 00

Debit Memo No. 18
On March 7, NetSolutions records the

return of the merchandise indicated in
Debit Memorandum No. 18.
55
55
56
6-3
On May 2, NetSolutions purchased

$5,000 of merchandise from Delta Data
Link, subject to terms 2/10, n/30.
May 2 Merchandise Inventory 5 000 00

Accounts Payable—Delta Data 5 000 00
Purchased merchandise.
56
56
57
6-3
On May 4, NetSolutions returns

$3,000 of the merchandise.
4 Accounts Payable—Delta Data Link 3 000 00
Merchandise Inventory 3 000 00
Returned portion of the
merchandise purchased.
57
57
58
6-3
On May 12, NetSolutions pays the amount due,

$1,960 [$2,000 – ($5,000 –$3,000) x 2%)].
12 Accounts Payable—Delta Data Links 2 000 00

Cash 1 960 00
Paid invoice [($5,000 –
$3,000) x 2% = $40;
$2,000 – $40 = $1,960]
58
58
59
6-3

Rofles Company purchased merchandise on account from a
supplier for $11,500, terms 2/10, n/30. Rofles Company
returned $3,000 of the merchandise and received full credit.
a. If Rofles Company pays the invoice within the

discount period, what is the amount of cash required
for the payment?
b. Under a perpetual inventory system, what account is
credited by Rofles Company to record the return?
59
59
60
6-3
a. $8,330. Purchase of $11,500 less the return of

$3,000 less the discount of $170 [($11,500 –
$3,000) x 2%].
b. Merchandise Inventory.
60
60
61
Transportation Costs 6-3
If ownership of the merchandise

passes to the buyer when the seller
delivers the merchandise to the
freight carrier, it is said to be FOB
(free on board) shipping point.
61
62
6-3
June 10 Merchandise Inventory 900 00

Accounts Payable—Magna Data 900 00
Purchased merchandise,
terms FOB shipping point.
10 Merchandise Inventory 50 00
Cash 50 00
Paid shipping cost .
On June 10, NetSolutions buys merchandise from

Magna Data on account, $900, terms FOB shipping
point and pays the transportation cost of $50. 62
62
63
Transportation Costs 6-3
If ownership of the merchandise

passes to the buyer when the
buyer receives the merchandise,
the terms are said to be FOB
(free on board) destination.
63
64
FOB Destination 6-3
On June 15, NetSolutions sells

merchandise to Kranz Company on
account, $700, terms FOB
destination. The cost of the
merchandise sold is $480.
64
65
6-3
June 15 Accounts Receivable—Kranz Co. 700 00

Sales 700 00
Sold merchandise, terms
FOB destination.

Record cost of merchandise
sold to Kranz Company.
65
65
66
6-3
June 15 Delivery Expense 40 00

Cash 40 00
Paid shipping cost on
merchandise sold.
On June 15, NetSolutions pays the

transportation cost of $40.
66
66
67
FOB Shipping Point 6-3
On June 20, NetSolutions sells

merchandise to Planter Company
on account, $800, terms FOB
shipping point. The cost of the
merchandise sold is $360.
67
68
6-3
June 20 Accounts Receivable—Planter Co. 800 00

Sales 800 00
Sold merchandise, terms
FOB shipping point.

Record cost of merchandise
sold to Planter Company.
68
68
69
6-3
June 20 Accounts Receivable—Planter Co. 45 00

Cash 45 00
Prepaid shipping cost on
merchandise sold.
NetSolutions pays the transportation

cost of $45 and adds it to the invoice.
69
69
70
6-3

Determine the amount to be paid in full settlement of each
of invoices (a) and (b), assuming that credit for returns and
allowances was received prior to payment and that all
invoices were paid within the discount period.
Transportation Returns and
Merchandise Paid by Seller Transportation Terms Allowances
a. $4,500 $200 FOB shipping point, $800
1/10, n/30
b. $5,000 $60 FOB destination, $2,500
2/10, n/30
70
70
71
6-3
a. $3,863. Purchase of $4,500 less return of $800

less the discount of $37 [($4,500 – $800) x 1%]
plus $200 of shipping.
b. $2,450. Purchase of $5,000 less return of
$2,500 less the discount of $50 [($5,000 –
$2,500) x 2%].
71
71
72
6-3
72
72
18
73
Sales Taxes 6-3
Aug. 12 Accounts Receivable—Lemon Co. 106 00

Sales 100 00
Sales Taxes Payable 6 00
Invoice No. 339
On August 12, merchandise is sold

on account to Lemon Company,
$100. The state has a 6% sales tax.
73
73
18
74
6-3
Sept. 15 Sales Tax Payable 2 900 00

Cash 2 900 00
Payment for sales taxes
collected during August.
On September 15, the seller sends in a

payment of $2,900 to the taxing unit for
the August taxes collected.
74
74
18
75
Trade Discounts 6-3
When wholesalers offer special

discounts to certain classes of buyers
that order large quantities, these
discounts are called trade discounts.
75
76
Dual Nature of Merchandise 6-3

Transactions
Each merchandising transaction affects a buyer

and a seller. In the following illustrations, we
show how the same transactions would be
recorded by both the seller and the buyer.
July 1. Scully Company sold merchandise on
account to Burton Co., $7,500, terms
FOB shipping point, n/45. The cost of
the merchandise sold was $4,500.
76
77
6-3
Scully Company (Seller)

Accounts Receivable—Burton Co. 7,500
Sales 7,500

Burton Company (Buyer)
Merchandise Inventory. 7,500
Accounts Payable—Scully Co. 7,500
77
77
18
78
6-3
July 2 Burton Company paid

transportation charges of $150 on
July 1 purchase from Scully
Company.
78
79
6-3

No entry.

Merchandise Inventory 150
Cash 150
79
79
18
80
6-3
July 5 Scully Company sold merchandise

on account to Burton Co., $5,000,
terms FOB destination, n/30. The
cost of the merchandise sold was
$3,500.
80
81
6-3

Sales 5,000

Merchandise Inventory. 5,000
81
81
18
82
6-3
July 7. Scully Company paid

transportation costs of $250 for
delivery of merchandise sold to
Burton Company on July 5.
82
83
6-3

Delivery Expense 250
Cash 250

No entry.
83
83
18
84
6-3
July 13. Scully Company issued Burton

Company a credit memorandum
for $1,000 of merchandise
returned from a July 5 purchase
on account. The cost of the
merchandise was $700.
84
85
6-3

Sales Returns and Allowances 1,000

Cost of Merchandise Sold 700
85
85
18
86
6-3
July 15. Scully Company received

payment from Burton Company
for purchase of July 5.
86
87
6-3

Cash 4,000

Cash 4,000
87
87
18
88
6-3
July 18. Scully Company sold

merchandise on account to
Burton Company, $12,000, terms
FOB shipping point, 2/10, n/eom.
Scully prepaid transportation
costs of $500, which were added
to the invoice. The cost of the
merchandise sold was $7,200.
88
89
6-3

Sales 12,000
Accounts Receivable—Burton Co. 500
Cash 500

89
89
18
90
6-3
July 28. Scully Company received payment

from Burton Company for purchase
of July 18, less discount (2% x
$12,000).
90
91
6-3

Cash 12,260
Sales Discounts 240

Cash 12,260
91
91
18
92
6-3
1-2

Sievert Co. sold merchandise to Bray Co. on account,
$11,500, terms 2/15, n/30. The cost of the merchandise sold
is $6,900. Sievert Co. issued a credit memorandum for
$900 for merchandise returned and later received the
amount due within the discount period. The cost of the
merchandise returned was $540. Journalize Sievert Co.’s
and Bray Co.’s entries for the receipt of the check for the
amount due from Bray Co.
92
92
93
6-3
Sievert Company Journal Entries:

Cash ($11,500 – $900 – $212) 10,388
Sales Discounts [($11,500 – $900) x 2%] 212
Accounts Receivable—Bray Co.
($11,500 – $900) 10,600
Bray Company Journal Entries:
Accounts Payable—Sievert Co. ($11,500 –
$900) 10,600
Merchandise Inventory [($11,500 – $900)
x 2%] 212
Cash ($11,500 – $900 – $212) 10,388
93
93
94
6-4
Objective 4
Describe the adjusting and
closing process for a
merchandising business.
94
95
Inventory Shrinkage 6-4
Merchandising businesses may experience

some loss of inventory due to shoplifting,
employee theft, or errors in recording or
counting inventory. If the balance of the
Merchandise Inventory account is larger than
the total amount of merchandise count, the
difference is often called inventory shrinkage
or inventory shortage.
95
96
6-4
NetSolutions inventory records

indicate that $63,950 of
merchandise should be
available for sale on December
31, 2009. The physical count
reveals that only $62,150 is
actually available.
96
97
6-4
Adjusting Entry
Dec. 31 Cost of Merchandise Sold 1 800 00
Merchandise Inventory 1 800 00
Inventory shrinkage (63,950
– $62,150).
Inventory records $63,950

Inventory count 62,150
Inventory shortage $ 1,800
97
97
18
98
Step 1: Closing Entries 6-4
Close the temporary accounts with credit

balances to Income Summary.
Date Item PR Debit Credit
Closing Entries
2009
Dec. 31 Sales 410 720 185 00
Rent Revenue 610 600 00
Income Summary 312 720 785 00
98
98
99
Close the temporary accounts

with debit balances to
Income Summary.
99
99
100

31 Income Summary 312 645 385 00
Sales Returns and Allow. 411 6 140 00
Sales Discounts 412 5 790 00
Cost of Merchandise Sold 510 525 305 00
Sales Salaries Expense 520 53 430 00
Advertising Expense 521 10 860 00
Depr. Exp.—Store Equip. 522 3 100 00
Delivery Expense 523 2 800 00
Misc. Selling Expense 529 630 00
Office Salaries Expense 530 21 020 00
Rent Expense 531 8 100 00
Depr. Exp.—Office Equip. 532 2 490 00
Insurance Expense 533 1 910 00
Office Supplies Expense 534 610 00
Misc. Administrative Exp. 539 760 00
Interest Expense 710 2 440 00
100
100
101
Close Income Summary (the balance represents

a $75,400 profit for NetSolutions in 2009) to
Chris Clark, Capital.
31 Income Summary 312 75 400 00

Chris Clark, Capital 310 75 400 00
101
101
102
Close Chris Clark, Drawing to Chris

Clark, Capital.
31 Chris Clark, Capital 310 18 000 00

Chris Clark, Drawing 311 18 000 00
102
102
103
6-4
1-2

Pulmonary Company’s perpetual inventory records indicate
that $382,800 of merchandise should be on hand on March
31, 2008. The physical inventory indicates that $371,250 of
merchandise is actually on hand. Journalize the adjusting
entry for the inventory shrinkage for Pulmonary Company
for the year ended March 31, 2008.
Mar. 31 Cost of Merchandise Sold ($382,800 –
($371,250) 11,550
103
103
104
Financial Analysis 6-4
The ratio of net sales to assets

measures how effectively a business is
using its assets to generate sales.
Ratio of Net Net sales

Sales to Assets =
Average total assets
104
105
6-4
Ratio of Net Sales to Assets

Sears J. C. Penney
Total revenue (net sales) $19,701* $18,424*
Total assets:
Beginning of year $6,074 $18,300
End of year $8,651 $14,127
Average $7,362.5 $16,213.5
Ratio of net sales to assets 2.68 to 1 1.14 to 1
*in millions 105
106
Interpretation 6-4
Based on these ratios, Sears

appears better than J. C.
Penney in utilizing its assets to
generate sales.
106

Merchandising Accounting

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Merchandising Accounting

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1

After studying this chapter, you should

After studying this chapter, you should

When merchandise is sold, the

The cost of merchandise sold is

Merchandise on hand (not

Example Exercise 6-1

Multiple-Step Income Statement 6-2

The Sales account

Sales returns and

Sales discounts are granted

Net sales is determined by

Multiple-Step Income Statement 6-2

Revenue from sales:

Other income and expenses:

Cost of merchandise sold

As we discussed in Slide 16,

The buyer may return merchandise

Cost of Merchandise 6-2

Single-Step Income Statement 6-2

An alternative form of income

Exhibit 3: Single-Step Income Statement 6-2

Exhibit 4: Statement of Owner’s Equity 6-2

Chris Clark, capital, 1/1/09 $153,800

Exhibit 5: Report Form of Balance Sheet 6-2

Exhibit 5: Report Form of Balance Sheet 6-2

Property, plant, and equip.:

Exhibit 5: Report Form of Balance Sheet 6-2

Example Exercise 6-2

Based upon the following data, determine the cost of

Follow My Example 6-2

Merchandise Inventory, May 1 $ 121,200

Cash Sales 6-3

On January 3, NetSolutions sold

Cash Sales (continued) 6-3

Using a perpetual inventory, the $1,200

Credit Card Sales 6-3

At the end of the month, $48 was

Sales on Account Using a Perpetual 6-3

12 Cost of Merchandise Sold 280 00

On January 12, NetSolutions sold Sims Company

Sales Discounts 6-3

The terms for when payments for

Credit Terms 6-3

Sales Discounts 6-3

Jan. 22 Cash 1 470 00

On January 22, NetSolutions receives the

Jan. 13 Sales Returns and Allowances 225 00

13 Merchandise Inventory 140 00

On January 13, issued Credit Memo 32 to Krier

Example Exercise 6-3

Follow My Example 6-3

a. Accounts Receivable 7,500

Purchase Transactions (Perpetual 6-3

On January 3, NetSolutions purchased merchandise

Jan. 4 Merchandise Inventory 9 250 00

On January 4, NetSolutions purchased

Purchases Discounts 6-3

Alpha Technologies issues

NetSolutions borrows cash at an annual interest

Purchase Transactions (Perpetual 6-3

Mar. 12 Merchandise Inventory 3 000 00

On March 12, NetSolutions purchased

Mar. 22 Accounts Payable—Alpha Technol. 3 000 00