BUS142G

Financial Accounting
In-class exercises
Ch. 5
S5-1
a. Periodic
b. Perpetual
c. Perpetual
d. Periodic
e. Perpetual
S5-3
Date Accounts and Explanation Debit Credit
Requirement 1 Apr. 2 Merchandise Inventory 23,000
Accounts Payable 23,000

4 Merchandise Inventory 110

Cash 110

8 Accounts Payable 6,400

Merchandise Inventory 6,400

14 Accounts Payable ($23,000 − $6,400) 16,600

Cash ($16,600 – $166) 16,434
Merchandise Inventory ($16,600 × 0.01) 166

Requirement 2
The inventory cost for Derry is $16,544 ($23,000 + $110 – $6,400 – $166)
S5-4
Date Accounts and Explanation Debit Credit
Apr. 1 Accounts Receivable 71,000
Sales Revenue 71,000

Cost of Goods Sold 41,000

Merchandise Inventory 41,000

5 Sales Returns and Allowances 3,500

Accounts Receivable 3,500

Merchandise Inventory 1,750

Cost of Goods Sold 1,750

10 Cash ($67,500 − $675) 66,825

Sales Discounts ($67,500 × 0.01) 675
Accounts Receivable ($71,000 − $3,500) 67,500
S5-8 CARISSA COMMUNICATIONS
Income Statement
Year Ended July 31, 2016

Sales Revenue $ 42,000

Less: Sales Returns and Allowances 7,400

Sales Discounts 4,300
Net Sales Revenue $ 30,300

Cost of Goods Sold 18,800

Gross Profit 11,500
Operating Expenses:
Selling Expenses 1,300
Administrative Expenses 3,100
Total Operating Expenses 4,400
Operating Income 7,100
Other Revenues and (Expenses):
Interest Expense (20)

Total Other Revenues and (Expenses) (20)

Net Income $ 7,080

S5-9
Requirement 1

CARISSA COMMUNICATIONS
Statement of Retained Earnings
Year Ended July 31, 2016
Retained Earnings, August 1, 2015 $ 0
Net income for the year 7,080
$ 7,080
Dividends (0)
Retained Earnings, July 31, 2016 $ 7,080
Requirement 2
CARISSA COMMUNICATIONS
Balance Sheet
July 31, 2016

Assets
Current Assets:
Cash $ 4,100
Accounts Receivable 3,400
Merchandise Inventory 1,200
Total Current Assets $ 8,700
Plant Assets:
Equipment, Net 8,500
Total Plant Assets 8,500
Total Assets $ 17,200

Liabilities
Current Liabilities:
Accounts Payable
$ 4,900
Accrued Liabilities 2,000
Total Current Liabilities $ 6,900
Long-term Liabilities:
Notes Payable 400
Total Liabilities 7,300

Stockholders’ Equity
Common Stock 2,820
Retained Earnings 7,080
Total Stockholders’ Equity 9,900
Total Liabilities and Stockholders’ Equity $ 17,200
S5-10

Sales Revenue $ 136,000

Less: Sales Returns and Allowances 5,300

Sales Discounts
1,800
Net Sales $ 128,900
Cost of Goods Sold 119,000
Gross Profit $ 9,900

Gross profit percentage = $9,900 / $128,900 = 7.68%

E5-18

Requirements 1, 2, and 3

Date Accounts and Explanation Debit Credit

Sep. 23 Merchandise Inventory 929.60

Accounts Payable 929.60

28 Accounts Payable 152.48

Merchandise Inventory 152.48

Oct. 1 Accounts Payable ($929.60 − $152.48) 777.12

Cash ($777.12 − $7.77) 769.35

Merchandise Inventory ($777.12 × 0.01) 7.77