Question 1

On September 1, Pennington Supply had an inventory of 20 backpacks at a cost of $25

each. The company uses a perpetual inventory system. During September, the following
transactions and events occurred.

Sept. 4 Purchased 50 backpacks at $25 each from Sievert, terms 2/10, n/30.

6 Received credit of $100 for the return of 4 backpacks purchased on September 4

that were defective.

9 Sold 25 backpacks for $40 each to Lilly Books, terms 2/10, n/30.

13 Sold 15 backpacks for $40 each to Stoner Office Supply, terms n/30.

14 Paid Sievert in full, less discount.

Instructions
Journalize the September transactions for Pennington Supply.

Question 2

Petersen Book Store entered into the transactions listed below. In the journal provided,
prepare Petersen’s necessary entries, assuming use of the perpetual inventory system.

July 6 Purchased $1,600 of merchandise on credit, terms n/30.

8 Returned $100 of the items purchased on July 6.

9 Paid freight charges of $90 on the items purchased July 6.

19 Sold merchandise on credit for $4,400, terms 1/10, n/30. The merchandise
had an inventory cost of $2,700.

22 Of the merchandise sold on July 19, $300 of it was returned. The items had
cost the store $150.

28 Received payment in full from the customer of July 19.

31 Paid for the merchandise purchased on July 6.

Question 3

Financial information is presented here for two companies.

King Company Queen Company

Sales revenue $56,000 ?

Sales returns and allowances ? 5,000
Net sales 50,000 80,000
Cost of goods sold 33,000 ?
Gross profit ? 32,000
Operating expenses 12,000 ?
Net income ? 14,000
Instructions
(a) Compute the missing amounts.
(b) Calculate the profit margin and the gross profit rate for each company.

Question 4

The adjusted trial balance of McCoy Company included the following selected accounts:
Debit Credit
Sales Revenue $645,000
Sales Returns and Allowances $ 50,000
Sales Discounts 9,500
Cost of Goods Sold 396,000
Freight-Out 2,000
Advertising Expense 15,000
Interest Expense 19,000
Salaries and Wages Expense 84,000
Utilities Expense 23,000
Depreciation Expense 3,500
Interest Revenue 25,000
Instructions
1. Use the above information to prepare a multiple-step income statement for the year
ended December 31, 2017.
2. Calculate the profit margin and gross profit rate.

Question 5

The trial balance of Rachel Company at the end of its fiscal year, August 31, 2017, includes
these accounts: Inventory $29,200; Purchases $144,000; Sales Revenue $190,000; Freight-
In $8,000; Sales Returns and Allowances $3,000; Freight-Out $1,000; and Purchases
Returns and Allowances $5,000. The ending inventory is $25,000.
Instructions
Prepare a cost of goods sold section for the year ending August 31.