Professional Documents
Culture Documents
Brief
Learning Objectives Questions Exercises Do It! Exercises Problems
*7. Record purchases and sales under a 20, 21 11, 12, 13, 17, 18, 19, 6, 7, 8
periodic inventory system. 14, 15 20, 21, 22
*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendices to the
chapter.
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-1
ASSIGNMENT CHARACTERISTICS TABLE
*6 Determine cost of goods sold and gross profit under Moderate 40–50
periodic approach.
*8 Journalize, post, and prepare trial balance and partial Simple 30–40
income statement using periodic approach.
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WEYGANDT FINANCIAL FINANCIAL ACCOUNTING, IFRS, 4e
CHAPTER 5
ACCOUNTING FOR MERCHANDISING OPERATIONS
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ACCOUNTING FOR MERCHANDISING OPERATIONS (Continued)
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BLOOM’S TAXONOMY TABLE
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Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
1. (a) Disagree. The steps in the accounting cycle are the same for both a merchandising company
and a service company.
(b) The measurement of income is conceptually the same. In both types of companies, net
income (or loss) results from the matching of expenses with revenues.
2. The normal operating cycle for a merchandising company is likely to be longer than in a service
company because inventory must first be purchased and sold, and then the receivables must be
collected.
Cost of
Sales Gross Operating Net
Less Goods Equals Less Equals
Revenue Profit Expenses Income
Sold
4. Income measurement for a merchandising company differs from a service company as follows:
(a) sales are the primary source of revenue and (b) expenses are divided into two main
categories: cost of goods sold and operating expenses.
5. In a perpetual inventory system, cost of goods sold is determined each time a sale occurs.
6. The letters FOB mean Free on Board. FOB shipping point means that goods are placed free on
board the carrier by the seller. The buyer then pays the freight and debits Inventory. FOB
destination means that the goods are placed free on board to the buyer’s place of business.
Thus, the seller pays the freight and debits Freight-out.
7. Credit terms of 2/10, n/30 mean that a 2% cash discount may be taken if payment is made within
10 days of the invoice date; otherwise, the invoice price, less any returns, is due 30 days from the
invoice date.
9. Agree. In accordance with the revenue recognition principle, companies record sales revenue
when the performance obligation is satisfied. The performance obligation is satisfied when the
goods transfer from the seller to the buyer; that is, when the exchange transaction occurs. The
earning of revenue is not dependent on the collection of credit sales.
10. (a) The primary source documents are: (1) cash sales—cash register tapes and (2) credit sales—
sales invoice.
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Questions Chapter 5 (Continued)
12. The perpetual inventory records for merchandise inventory may be incorrect due to a variety of
causes such as recording errors, theft, or waste.
14. Of the merchandising accounts, only Inventory will appear in the post-closing trial balance.
17. There are three distinguishing features in the income statement of a merchandising company:
(1) a sales revenues section, (2) a cost of goods sold section, and (3) gross profit.
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-7
Questions Chapter 5 (Continued)
*18. (a) The operating activities part of the income statement has three sections: sales revenues,
cost of goods sold, and operating expenses.
(b) The nonoperating activities part consists of two sections: other income and expense, and
interest expense.
*
*19. The columns are:
(a) Inventory—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Statement of Financial
Position (Dr.).
(b) Cost of Goods Sold—Trial Balance (Dr.), Adjusted Trial Balance (Dr.), and Income
Statement (Dr.).
*20.
Accounts Added/Deducted
Purchase Returns and Allowances Deducted
Purchase Discounts Deducted
Freight-In Added
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SOLUTIONS TO BRIEF EXERCISES
Gordon Tannery
Accounts Receivable........................................... 780
Sales Revenue.............................................. 780
Cost of Goods Sold............................................. 560
Inventory....................................................... 560
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BRIEF EXERCISE 5.3 (Continued)
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BRIEF EXERCISE 5.7
YANGTZE CANOES
Income Statement (Partial)
For the Month Ended October 31, 2020
Sales revenues
Sales revenue (¥280,000 + ¥100,000)................. ¥380,000
Less: Sales returns and allowances................. ¥22,000
Sales discounts........................................ 5,000 27,000
Net sales............................................................... ¥353,000
Item Section
(a) Gain on sale of equipment Other income and expense
(b) Interest expense After other income and expenses
(c) Casualty loss from vandalism Other income and expense
(d) Cost of goods sold Cost of goods sold
(e) Depreciation expense Operating expenses
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-11
BRIEF EXERCISE 5.9
(a) Net sales = €506,000 – €13,000 = €493,000.
(b) Gross profit = €493,000 – €342,000 = €151,000.
(a) Cash: Trial balance debit column; Adjusted trial balance debit column;
Statement of financial position debit column.
(d) Cost of goods sold: Trial balance debit column, Adjusted trial balance
debit column, Income statement debit column.
Purchases....................................................................... W430,000
Less: Purchase returns and allowances..................... W13,000
Purchase discounts............................................ 8,000 21,000
Net purchases................................................................. W409,000
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*BRIEF EXERCISE 5.12
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-13
*BRIEF EXERCISE 5.15
(a) Cash: Trial balance debit column; Adjusted trial balance debit column;
Statement of financial position debit column.
(b) Beginning inventory: Trial balance debit column; Adjusted trial balance
debit column; Income statement debit column.
(c) Accounts payable: Trial balance credit column; Adjusted trial balance
credit column; Statement of financial position credit column.
DO IT! 5.1
1. True.
2. False. Under a perpetual inventory system, a company determines the
cost of goods sold at each time a sale occurs.
3. False. Both service and merchandising companies are likely to use
accounts receivable.
4. True.
DO IT! 5.2
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DO IT! 5.3
Inventory................................................................. 160
Cost of Goods Sold ......................................... 160
(To record fair value of goods returned)
DO IT! 5.4
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DO IT! 5.5
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SOLUTIONS TO EXERCISES
EXERCISE 5.1
1. True.
2. False. For a merchandiser, sales less cost of goods sold is called
gross profit.
3. True.
4. True.
5. False. The operating cycle of a merchandiser differs from that of a
service company. The operating cycle of a merchandiser is ordinarily
longer.
6. False. In a periodic inventory system, no detailed inventory records of
goods on hand are maintained.
7. True.
8. False. A perpetual inventory system provides better control over inven-
tories than a periodic system.
EXERCISE 5.2
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EXERCISE 5.3
9 Inventory.......................................................... 180
Cash.......................................................... 180
EXERCISE 5.4
11 Inventory................................................... 400
Cash.................................................. 400
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EXERCISE 5.4 (Continued)
EXERCISE 5.5
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-19
EXERCISE 5.6
Sales
Sales revenue.................................................. €820,000
Less: Sales returns and allowances............ €28,000
Sales discounts................................... 13,000 41,000
Net sales.......................................................... €779,000
EXERCISE 5.7
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EXERCISE 5.8
EXERCISE 5.9
Sales
Sales revenue.................................................... £380,000
Less: Sales returns and allowances.............. £13,000
Sales discounts..................................... 7,400 20,400
Net sales............................................................ 359,600
Cost of goods sold................................................ 212,000
Gross profit............................................................ 147,600
Operating expenses
Salaries and wages expense............................ 58,000
Rent expense..................................................... 32,000
Freight-out......................................................... 9,000
Insurance expense............................................ 7,000
Total operating expenses..................... 106,000
Net income......................................................... £ 41,600
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-21
EXERCISE 5.9 (Continued)
EXERCISE 5.10
5-22 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
Comprehensive income...................... €173,300
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EXERCISE 5.11
2. Supplies.............................................................................. 1,400
Cash..................................................................................... 1,400
Accounts Payable....................................................... 1,400
Inventory...................................................................... 1,400
4. Inventory............................................................................. 200
Cash..................................................................................... 1,800
Freight-Out.................................................................. 2,000
EXERCISE 5.12
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EXERCISE 5.13
Boris Footwear
Gross profit ÷ Net sales = py 37,500 ÷ py 98,000 = 38.3%
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EXERCISE 5.14
(*Missing amount)
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EXERCISE 5.14 (Continued)
*EXERCISE 5.15
Statement of
Adjusted Income Financial
Accounts Trial Balance Statement Position
Debit Credit Debit Credit Debit Credit
Cash 9,000 9,000
Inventory 76,000 76,000
Sales Revenue 460,000 460,000
Sales Returns and Allowances 10,000 10,000
Sales Discounts 9,000 9,000
Cost of Goods Sold 288,000 288,000
*EXERCISE 5.16
BARBOSA APPAREL
Worksheet
For the Month Ended June 30, 2020
Adj. Trial Income Statement of
Account Titles Trial Balance Adjustments Balance Statement Financial Position
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 2,120 2,120 2,120
Accounts Receivable 2,740 2,740 2,740
Inventory 11,640 11,640 11,640
Accounts Payable 1,120 1,640 2,760 2,760
Share Capital—Ordinary 4,000 4,000 4,000
Sales Revenue 42,800 42,800 42,800
Cost of Goods Sold 20,560 20,560 20,560
Operating Expenses 10,860 1,640 12,500 12,500
Totals 47,920 47,920 1,640 1,640 49,560 49,560 33,060 42,800 16,500 6,760
Net Income 9,740 9,740
Totals 42,800 42,800 16,500 16,500
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-27
*EXERCISE 5.17
*EXERCISE 5.18
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*EXERCISE 5.19
*EXERCISE 5.20
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*EXERCISE 5.21
5-30 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
*EXERCISE 5.22
Statement of
Adjusted Income Financial
Accounts Trial Balance Statement Position
Debit Credit Debit Credit Debit Credit
Cash 9,000 9,000
Inventory 80,000 80,000 75,000 75,000
Purchases 240,000 240,000
Purchase Returns and
Allowances 30,000 30,000
Sales Revenue 450,000 450,000
Sales Returns and
Allowances 10,000 10,000
Sales Discounts 5,000 5,000
Rent Expense 42,000 42,000
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-31
SOLUTIONS TO PROBLEMS
PROBLEM 5.1
12 Cash................................................................ 2,178
Sales Discounts (£2,200 X .01)..................... 22
Accounts Receivable............................. 2,200
18 Inventory......................................................... 1,900
Accounts Payable.................................. 1,900
Inventory......................................................... 125
Cash........................................................ 125
21 Cash................................................................ 1,386
Sales Discounts (£1,400 X .01)..................... 14
Accounts Receivable............................. 1,400
5-32 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
PROBLEM 5.1 (Continued)
Inventory......................................................... 120
Cost of Goods Sold................................ 120
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-33
PROBLEM 5.2
(a)
General Journal J1
Date Account Titles Ref. Debit Credit
Apr. 2 Inventory.............................................. 120 6,200
Accounts Payable....................... 201 6,200
5-34 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
PROBLEM 5.2 (Continued)
General Journal J1
Date Account Titles Ref. Debit Credit
Apr. 23 Cash..................................................... 101 7,400
Sales Revenue............................. 401 7,400
Cost of Goods Sold............................ 505 4,120
Inventory...................................... 120 4,120
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PROBLEM 5.2 (Continued)
(b)
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PROBLEM 5.2 (Continued)
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PROBLEM 5.2 (Continued)
Sales
Sales revenue...................................................... €16,300
Less: Sales returns and allowances................ €90
Sales discounts....................................... 55 145
Net sales.............................................................. 16,155
Cost of goods sold..................................................... 9,390
Gross profit................................................................. € 6,765
5-38 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
PROBLEM 5.3
Sales revenues
Sales.................................................... £724,000
Less: Sales returns and
allowances............................... 8,000
Net sales.............................................. 716,000
Cost of goods sold.................................... 412,700
Gross profit................................................ 303,300
Operating expenses
Salaries and wages expense...... £105,000
Depreciation expense.................. 23,500
Sales commissions expense...... 14,500
Utilities expense........................... 12,000
Insurance expense....................... 7,200
Property tax expense................... 4,800
Total operating expenses..... 167,000
Income from operations............................ 136,300
Other income and expense
Interest revenue.................................. 4,000
Interest expense........................................ 8,100
Net income................................................. £ 132,200
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-39
PROBLEM 5.3 (Continued)
Assets
Property, plant, and equipment
Buildings............................................... £290,000
Less: Accumulated depreciation—
buildings................................... 52,500 £237,500
Equipment............................................ 110,000
Less: Accumulated depreciation—
equipment................................. 42,700 67,300 £304,800
Current assets
Prepaid insurance................................ 2,400
Inventory............................................... 75,000
Accounts receivable............................ 50,300
Cash..................................................... 23,800 151,500
Total assets................................. £456,300
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PROBLEM 5.3 (Continued)
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PROBLEM 5.3 (Continued)
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PROBLEM 5.4
(a)
General Journal J1
Date Account Titles Ref. Debit Credit
Apr. 4 Inventory................................................ 120 760
Accounts Payable......................... 201 760
Copyright © 2019 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-43
PROBLEM 5.4 (Continued)
General Journal J1
Date Account Titles Ref. Debit Credit
Apr. 20 Cash...................................................... 101 600
Accounts Receivable................... 112 600
(b)
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PROBLEM 5.4 (Continued)
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PROBLEM 5.4 (Continued)
Debit Credit
Cash.......................................................................... ¥1,718
Accounts Receivable.............................................. 670
Inventory.................................................................. 2,392
Share Capital—Ordinary......................................... ¥4,000
Sales Revenue......................................................... 2,130
Sales Returns and Allowances.............................. 40
Cost of Goods Sold................................................. 1,310
¥6,130 ¥6,130
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5-46
(a) ROSIAK FASHION CENTER
Worksheet
For the Year Ended November 30, 2020
Adjusted Income Statement of
Account Titles Trial Balance Adjustments Trial Balance Statement Financial Position
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 8,700 8,700 8,700
Copyright © 2018 WILEY Weygandt, Financial Accounting, IFRS 4/e, Solutions Manual (For Instructor Use Only)
*PROBLEM 5.5
Accounts Payable 48,500 48,500 48,500
Share Capital—Ordinary 50,000 50,000 50,000
Retained Earnings 38,000 38,000 38,000
Dividends 8,000 8,000 8,000
Sales Revenue 755,200 755,200 755,200
Sales Returns and 12,800
Allowances 12,800 12,800 497,580
Cost of Goods Sold 497,400 (d) 180 497,580
Salaries and Wages 136,000
Expense 136,000 136,000 24,400
Advertising Expense 24,400 24,400 14,000
Utilities Expense 14,000 14,000
Maintenance and Repairs 12,100
Expense 12,100 12,100 16,700
Freight-Out 16,700 16,700 24,000
Rent Expense 24,000 24,000
Totals 965,700 965,700 4,100
Supplies Expense (a) 4,100 4,100 11,500
Depreciation Expense (b) 11,500 11,500
Interest Expense (c) 4,000 4,000 4,000
Interest Payable (c) 4,000 4,000 4,000
Totals 19,780 19,780 981,200 981,200 757,180 755,200 224,020 226,000
Net Loss 1,980 1,980
Totals 757,180 757,180 226,000 226,000
Key: (a) Supplies used, (b) Depreciation expense, (c) Accrued interest payable, (d) Adjustment of inventory.
*PROBLEM 5.5 (Continued)
Sales revenues
Sales revenue.............................................. £755,200
Less: Sales returns and
allowances........................................ 12,800
Net sales....................................................... 742,400
Cost of goods sold............................................. 497,580
Gross profit......................................................... 244,820
Operating expenses
Salaries and wages expense............... £136,000
Advertising expense............................ 24,400
Rent expense........................................ 24,000
Freight-out............................................ 16,700
Utilities expense................................... 14,000
Maintenance and repairs expense...... 12,100
Depreciation expense.......................... 11,500
Supplies expense................................. 4,100
Total operating expenses............. 242,800
Income from operations.................................... 2,020
Interest expense................................................. 4,000
Net loss............................................................... £ (1,980)
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*PROBLEM 5.5 (Continued)
Assets
Property, plant, and equipment
Equipment......................................... £133,000
Less: Accumulated depreciation—
equipment..................................... 34,500 £98,500
Current assets
Supplies............................................. 2,100
Inventory........................................... 44,520
Accounts receivable......................... 27,700
Cash................................................... 8,700 83,020
Total assets............................... £181,520
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-49
*PROBLEM 5.5 (Continued)
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*PROBLEM 5.5 (Continued)
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*PROBLEM 5.5 (Continued)
Debit Credit
Cash.................................................................. £ 8,700
Accounts Receivable...................................... 27,700
Inventory.......................................................... 44,520
Supplies........................................................... 2,100
Equipment........................................................ 133,000
Accumulated Depreciation—Equipment....... £ 34,500
Notes Payable.................................................. 51,000
Accounts Payable........................................... 48,500
Interest Payable............................................... 4,000
Share Capital—Ordinary................................. 50,000
Retained Earnings........................................... 28,020
£216,020 £216,020
5-52 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
*PROBLEM 5.6
Sales
Sales revenue..................................... NT$21,540,000
Less: Sales returns and
allowances........................... 510,000
Net sales ........................................... 21,030,000
Cost of goods sold
Inventory, January 1.......................... NT$1,215,000
Purchases........................................... NT$13,200,000
Less: Purchase returns
and allowances.................... NT$192,000
Purchase discounts............ 360,000 552,000
Net purchases.................................... 12,648,000
Add: Freight-in.................................. 165,000
Cost of goods purchased................... 12,813,000
Cost of goods available
for sale ..................................... 14,028,000
Less: Inventory, December 31............... 1,950,000
Cost of goods sold.................... 12,078,000
Gross profit................................................. NT$8,952,000
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-53
*PROBLEM 5.7
(a)
2018 2019 2020
Cost of goods sold:
Beginning inventory € 13,000 € 11,300 € 14,700
Plus: Purchases 141,000 150,000 132,000
Cost of goods available 154,000 161,300 146,700
Less: Ending inventory 11,300 14,700 12,200
Cost of goods sold €142,700 €146,600 €134,500
(b)
2018 2019 2020
Sales revenue €225,700 €240,300 €235,000
Less: CGS 142,700 146,600 134,500
Gross profit € 83,000 € 93,700 €100,500
(c)
2018 2019 2020
Beginning accounts payable € 20,000 € 26,000 € 15,000
Plus: Purchases 141,000 150,000 132,000
Less: Payments to suppliers 135,000 161,000 127,000
Ending accounts payable € 26,000 € 15,000 € 20,000
1 2 3
(d) Gross profit rate 36.8% 39.0% 42.8%
1 2 3
€83,000 ÷ €93,700 ÷ €100,500 ÷
€225,700 €240,300 €235,000
No. Even though sales declined in 2020 from the prior year, the gross
profit rate increased. This means that cost of goods sold declined more
than sales did, reflecting better purchasing power or control of costs.
Therefore, in spite of declining sales, profitability, as measured by the
gross profit rate, actually improved.
5-54 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
*PROBLEM 5.8
(a)
General Journal
Date Account Titles Debit Credit
Apr. 4 Purchases.......................................................... 860
Accounts Payable..................................... 860
6 Freight-In........................................................... 74
Cash........................................................... 74
10 Accounts Payable............................................. 60
Purchase Returns and Allowances......... 60
11 Purchases.......................................................... 300
Cash........................................................... 300
14 Purchases.......................................................... 700
Accounts Payable..................................... 700
15 Cash................................................................... 90
Purchase Returns and Allowances......... 90
17 Freight-In........................................................... 25
Cash........................................................... 25
20 Cash................................................................... 500
Accounts Receivable................................ 500
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-55
*PROBLEM 5.8 (Continued)
(b)
Cash Accounts Payable
4/1 Bal. 2,500 4/6 74 4/10 60 4/4 860
4/15 90 4/11 300 4/13 800 4/14 700
4/20 500 4/13 776 4/21 700
4/30 630 4/17 25 4/30 Bal. 0
4/21 686
4/30 Bal. 1,859 Share Capital—Ordinary
4/1 Bal. 4,200
Accounts Receivable 4/30 Bal. 4,200
4/8 900 4/20 500
4/18 1,200 4/27 25 Sales Revenue
4/30 630 4/8 900
4/30 Bal. 945 4/18 1,200
4/30 Bal. 2,100
Inventory
4/1 Bal. 1,700 Purchase Discounts
4/30 Bal. 1,700 4/13 24
4/21 14
Sales Returns and Allowances 4/30 Bal. 38
4/27 25
4/30 Bal. 25 Freight-In
4/6 74
Purchases 4/17 25
4/4 860 4/30 Bal. 99
4/11 300
4/14 700
4/30 Bal. 1,860
Purchase
Returns and Allowances
4/10 60
4/15 90
4/30 Bal. 150
5-56 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
*PROBLEM 5.8 (Continued)
Debit Credit
Cash......................................................................... CHF1,859
Accounts Receivable.............................................. 945
Inventory.................................................................. 1,700
Share Capital—Ordinary........................................ CHF4,200
Sales Revenue........................................................ 2,100
Sales Returns and Allowances.............................. 25
Purchases................................................................ 1,860
Purchase Returns and Allowances....................... 150
Purchase Discounts............................................... 38
Freight-In................................................................. 99
CHF 6,488 CHF 6,488
Sales
Sales revenue............................... CHF2,100
Less: Sales returns and
allowances........................ 25
Net sales....................................... 2,075
Cost of goods sold
Inventory, April 1.......................... CHF1,700
Purchases..................................... CHF1,860
Less: Purchase returns
and allowances.................CHF150
Purchase discounts......... 38 188
Net purchases.............................. 1,672
Add: Freight-in............................ 99
Cost of goods purchased............ 1,771
Cost of goods available
for sale................................... 3,471
Less: Inventory, April 30............. 2,140
Cost of goods sold............... 1,331
Gross profit......................................... CHF 744
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-57
ACR 5 SOLUTION
8 Cash............................................................... 2,100
Accounts Receivable............................ 2,100
10 Cash............................................................... 6,600
Sales Revenue....................................... 6,600
13 Inventory........................................................ 9,000
Accounts Payable.................................. 9,000
15 Supplies......................................................... 2,000
Cash........................................................ 2,000
27 Cash............................................................... 11,640
Sales Discounts (€12,000 X .03)................... 360
Accounts Receivable............................ 12,000
5-58 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
ACR 5 (Continued)
Cash
Equipment
12/1 Bal. 7,200 12/6 1,600
12/8 2,100 12/15 2,000 12/1 Bal. 22,000
12/10 6,600 12/20 1,800 12/31 Bal.22,000
12/27 11,640 12/23 8,820
12/31 Bal.13,320 Accumulated Depr.—Equipment
12/1 Bal. 2,200
Accounts Receivable 12/31 200
12/1 Bal. 4,600 12/8 2,100 12/31 Bal. 2,400
12/18 12,000 12/27 12,000
12/31 Bal. 2,500 Accounts Payable
12/23 9,000 12/1 Bal. 4,500
Inventory 12/13 9,000
12/1 Bal. 12,000 12/10 4,100 12/31 Bal. 4,500
12/13 9,000 12/18 8,400
12/23 180 Salaries and Wages Payable
12/31 Bal. 8,320 12/6 1,000 12/1 Bal. 1,000
12/31 800
Supplies 12/31 Bal. 800
12/1 Bal. 1,200 12/31 1,500
12/15 2,000
12/31 Bal. 1,700
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-59
ACR 5 (Continued)
Sales Discounts
12/27 360
12/31 Bal. 360
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ACR 5 (Continued)
DR. CR.
Cash.................................................................... €13,320
Accounts Receivable......................................... 2,500
Inventory............................................................. 8,320
Supplies.............................................................. 1,700
Equipment.......................................................... 22,000
Accumulated Depreciation—Equipment.......... € 2,400
Accounts Payable.............................................. 4,500
Salaries and Wages Payable............................. 800
Share Capital—Ordinary.................................... 30,000
Retained Earnings.............................................. 9,300
Sales Revenue.................................................... 18,600
Sales Discounts................................................. 360
Cost of Goods Sold............................................ 12,500
Depreciation Expense........................................ 200
Salaries and Wages Expense............................ 3,200
Supplies Expense.............................................. 1,500
€65,600 €65,600
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-61
ACR 5 (Continued)
JURCZYK DISTRIBUTING
Retained Earnings Statement
For the Month Ended December 31, 2020
JURCZYK DISTRIBUTING
Statement of Financial Position
December 31, 2020
Assets
Equity
Share capital—Ordinary............................. €30,000
Retained earnings...................................... 10,140 €40,140
Current liabilities
Accounts payable....................................... €4,500
Salaries and wages payable...................... 800 5,300
Total equity and liabilities ................................ €45,440
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CT 5.1 FINANCIAL REPORTING PROBLEM
2015 2016
(a) (1) Percentage change in sales:
(NT$947,938,344 – NT$843,497,368) 12.4% increase
÷ NT$843,497,368
Comment
The percentage of net income to sales decreased 2.8% from 2015 to 2016
(36.3% to 35.3%). The gross profit rate increased 2.9% during this time.
(48.7% to 50.1%)
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-63
CT 5.2 COMPARATIVE ANALYSIS PROBLEM
(b) Because the companies report using different currencies, direct com-
parisons of total gross profit, or total operating income are difficult.
Comparisons of ratios and percentages can be performed. Nestlé
reported a significantly higher gross profit rate, and had a percentage
increase in operating income compared to Delfi’s very large operating
income increase.
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CT 5.3 REAL-WORLD FOCUS
(a), (b)
President
Boardin Co.
Dear Sir:
As you know, the financial statements for Boardin Co. are prepared in
accordance with IFRS. One of these principles is the revenue recognition
principle, which provides that revenues should be recognized when the
performance obligation is satisfied.
Typically, sales revenues are recognized when the goods are transferred to
the buyer from the seller. At this point, the sales transaction is completed
and the sales price is established. Thus, in the typical situation, revenue on
the surfboard ordered by Dexter is earned at event No. 8, when Dexter
picks up the surfboard.
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-65
If you have further questions about the accounting for this sale, please let
me know.
Sincerely,
5-66 Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only)
CT 5.6 ETHICS CASE
1. Tell the treasurer (her boss) that she will attempt to take every allow-
able cash discount by preparing and mailing checks within the
discount period—the ethical thing to do. This will offend her boss
and may jeopardize her continued employment.
2. Join the team and continue the unethical practice of taking undeserved
cash discounts.
3. Go over her boss’s head and take the chance of receiving just and
reasonable treatment from an officer superior to Chris. The company
may not condone this practice. Anita definitely has a choice, but
probably not without consequence. To continue the practice is
definitely unethical. If Anita submits to this request, she may be
asked to perform other unethical tasks. If Anita stands her ground
and refuses to participate in this unethical practice, she probably
won’t be asked to do other unethical things—if she isn’t fired.
Maybe nobody has ever challenged Chris’s unethical behavior and
his reaction may be one of respect rather than anger and retribution.
Being ethically compromised is no way to start a new job.
Copyright © 2019 WILEY Weygandt, Financial Accounting IFRS 4/e, Solutions Manual (For Instructor Use Only) 5-67
GAAP EXERCISES
GAAP 5.1
GAAP5.2
GAAP5.3
ATLANTIS COMPANY
Comprehensive Income Statement
For the Year Ended 2020
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GAAP FINANCIAL REPORTING PROBLEM
GAAP 5.4
2015 2016
(a) (1) Percentage change in net sales:
($233,715 – $182,795) ÷ $182,795 27.9% increase
($215,639 – $233,715) ÷ $233,715 7.7% decrease
Comment
The percentage of net income to sales increased 5.6% from 2014 to 2015
(21.6% to 22.8%) and decreased 7.0% from 2015 to 2016 (22.8% to 21.2%).
The gross profit rate shows a similar pattern during this time.
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