Tutorial 1

Example (1) The following were selected from among the transactions completed by Cairo
trading company during April 2020:
April 4 Purchased merchandise on credit from Alexandria Trading company, invoice price L.E
10000, terms F.O.B shipping point 3/10,n/30 and paid freight charge amount L.E 500.
7 Sold merchandise on account to Tanta Trade Company list price 7500 , trade discount
20% terms F.O.B. destination (Tanta), 2/10, n/eom, and paid freight charges amounted
L.E 250
10 Returned L.E 1000 merchandise purchased on April 5 from Alexandria trading Company.
12 Issued a credit note for L.E 1000 to Tanta Company for defective merchandise sold on
April 7 .
13 The owner withdrew L.E 200 from the business to pay personal expenses .
14 Paid the proper amount to Alexandria Trading company
16 Received the proper amount due from Tanta Company
Required : Record the Above transactions in the Journal of Cairo Trading Company using
a periodic inventory system
Solution
Date Accounts & Explanation Debit Credit
April 4 Purchases 10.000
Accounts payable (Alex. ) 10.000
(3/10 , n/30)
April 4 Freight – in 500
Cash 500
April 7 Accounts Receivable (Tanta) 6000
Sales 6000
Trade discount = 7500 – ( 7500 × 20 % ) = 6000
(2/10, n/eom)
April 7 Freight – out 250
Cash 250
April 10 Accounts Payable (Alex ) 1000
Purchases returns 1000
April 12 Sales returns 1000
Accounts Receivable (Tanta) 1000
April 13 Drawing 200
Cash 200
April 14 Accounts payable (Alex) 10.000 – 1000 9000
Cash ( 9900 – 297 ) 8230
Purchases discount ( 9000 × 3 % ) 270
April 16 Cash 5000 – 100 4900
Sales discount 5000 × 2% 100
Accounts Receivable (Tanta) 6000 – 1000 5000
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Example (2) The following were selected from among the transactions completed by MALAK
Company during April 2004 :
April Sold merchandise on account to RETAL Company, list price 25000 , trade discount
10 20% terms F.O.B. shipping point, 2/10, n/eom. Freight charges amounted L.E 500
paid by RETAL Company
12 RETAL Company returned L.E 2000 of goods purchased on April 10
20 Received the proper amount from RETAL Company
Required : Record the Above transactions using periodic inventory system in the Journal of :
a- MALAK Company b- RETAL Company
Solution
(A) Journal entries in journal of MALAK Company
Date Accounts & Explanation Debit Credit
April 10 Accounts Receivable (RETAL) 20.000
Sales 20.000
25.000 – ( 25.000 × 20 % ) =20.000
April 12 Sales returns 2000
Accounts Receivable (RETAL ) 2000
April 20 Cash 18000 – 540 17460
Sales discount 18000 × 3% 540
Accounts Receivable (RETAL) 20000 – 2000 18000

(B) Journal entries in journal of RETAL Company

Date Accounts & Explanation Debit Credit
April 10 Purchases 20.000
Accounts Payable (MALK ) 20.000
April 10 Freight – in 500
Cash 500
April 12 Accounts payable (MALK) 2000
Purchases returns 2000
April 20 Accounts payable (MALK) 20000 – 2000 18000
Cash 18000 – 540 17460
Purchases discount 18000 × 3 % 540

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Example (3) During September , the following transactions and events occurred in Syna Supply
Company:
Sept 3 Purchased L.E. 300.000 of merchandise on account, terms 2/10,n/30.
Sept 6 Returned L.E. 40.000 of merchandise purchased on Sept 3
Sept 9 Sold merchandise on account, list price 250.000 , trade discount 20% terms F.O.B.
Destination 3/10, n/30, and paid freight charges amounted L.E 5000
Sept 13 Paid the merchandise purchased on Sept. 3
Sept 19 Received the proper amount for sales of Sept. 9
Required : Journalize the September transactions for Syna Supply Company.
Solution
Date Accounts & Explanation Debit Credit
Sept 3 Purchases 300.000
Accounts payable 300.000
Sept 6 Accounts payable 40.000
Purchases returns 40.000
Sept 9 Accounts Receivable 200.000
Sales 200.000
250.000 – ( 250.000 × 20 % ) =200.000
Sept 9 Freight – out 5000
Cash 5000
Sept 13 Accounts payable 300.0000 – 40.000 260.000
Cash 260.000 – 5200 245.800
Purchases discount 260.000 × 2 % 5200
Sept 19 Cash 200.000 – 6000 194.000
Sales discount 200.000 × 3% 6000
Accounts Receivable 200.000

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Example (4) SALMA Book Warehouse distributes hardcover books to retail stores and extends
credit terms of 2/10,n30 to all of its customers. During June the following merchandising
transactions occurred:
June 1 Purchased books on account for L.E 1200 from RETAL Publishers, FOB shipping
point, terms 2/10,n30. The appropriate party also made cash payment of L.E 50 for the
freight on this date.
3 Sold books on account to MALK Stores for L.E 2500, the cost of the merchandise sold
was L.E 2000, FOB destination. The appropriate party also made cash payment of L.E
70 for the freight on this date.
6 Received L.E 100 credit for books returned to RETAL Publishers.
9 Paid the proper amount to RETAL Publishers.
12 Issued a credit note for L.E 500 to MALK Stores for defective merchandise costing
400 sold on June 3.
15 Received the proper amount due from MALK Stores
20 Purchased books on account for L.E 1500 from GANNA Publishers, FOB Destination,
terms 3/7,n30. The appropriate party also made cash payment of L.E 50 for the freight
on this date.
30 Paid the proper amount to GANNA Publishers.
Required : Journalize the transactions for the month of June for SALMA Book Warehouse using
a perpetual inventory system .

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 Solution
Date Accounts & Explanation Debit Credit
June 1 Inventory 1200
Accounts Payable (RETAL ) 1200
1 Inventory 50
Cash 50
3 Accounts Receivable (MALK) 2500
Sales 2500
3 Cost of goods sold 2000
Inventory 2000
6 Accounts Payable (RETAL ) 100
Inventory 100
9 Accounts Payable (Malk) 1200 – 100 1100
Inventory (1100 × 2% ) 22
Cash ( 1100 – 22 ) 1078
12 Sales returns 500
Accounts Receivable (MALK) 500
12 Inventory 400
Cost of goods sold 400
15 Cash ( 2000 – 40 ) 1960
Sales discount ( 2000 × 2% ) 40
Accounts Receivable (MALK) 2500 – 500 2000
20 Inventory 1500
Accounts Payable (GANNA ) 1500
30 Accounts Payable (GANNA ) 1500
Cash 1500

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Example (5) Super Copy Co. is an office supply store, Record the following transactions in the
company's general journal using perpetual inventory system
July Purchased 6 Copying machines on account from Dalia Corp. total invoice prince
1 was 2500 per machine (L.E 10.000 total) terms of 2/10, n/30. These machines are
intended for resale.
3 Found one of the Dalia copiers to be defective and returned it to Dalia, thus
reducing the amount owed.
9 Sold Two of the Dalia copiers to Dina Realty. The sales price was L.E 3500, terms
5/10, n/60.
10 Paid the remaining amount owed to Dalia Corp.
19 Received full payment from Dina. .
Solution
Date Accounts & Explanation Debit Credit
July 1 Inventory 15.000
Accounts payable (Dina) 15.000
July 3 Accounts payable (Dina) 2500
Inventory 2500
July 9 Accounts Receivable (Dina) 2× 3500 7000
Sales 7000
July 9 Cost of goods sold 2 × 2500 5000
Inventory 5000
July 10 Accounts payable (Dalia ) 15000 – 2500 12500
Inventory (12500 × 2% ) 1250
Cash ( 12500 – 250 ) 12250
July 19 Cash ( 7000 – 140 ) 6860
Sales discount (7000 × 2% ) 140
Accounts Receivable (Dina) 7000

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 Income statement
The adjusted trial balance of Karim Book company for the year ended December 31, 2020
appears below:
Dr Cr
Cash 32.000
Accounts receivable 25.000
Merchandise inventory 35.000
Building 150.000
Accumulated depreciation : building 20.000
Accounts payable 12.000
Karim capital 149.000
Karim Drawing 10.000
Sales 305.000
Sales discount 6.000
Sales returns and allowance 8.000
Purchases 167.000
Freight – out 13.000
Purchases returns and allowance 2.000
Purchases discount 5.000
Freight – in 10.000
Selling expenses 18.000
Administrative expenses 19.000
493.000 493.000
The physical inventory taken on December 31 amounted to 22.000. prepare a classified
income statement for the year ended December 31, 2020 and classified balance sheet at
December 31,2020.
Solution

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(a) Income Statement
Karim Book company
Income Statement
For the year ended December, 31, 2020
Sales revenue 305.000
Less: − Sales discount 6.000
− Sales returns & allowance 8.000
(14.000)
Net sales 291.000
Less: cost of goods sold
Beginning inventory 35.000

+ Cost of goods purchased

Purchases 167.000
(–) Purchases returns & allowance (2000)
(–) Purchases discount (5000)
= Net Purchases 160.000
(+) Freight – in 10.000
Cost of goods purchased 170.000
= available goods for sale 205.000

– Ending inventory (22.000)

= Cost of goods sold (183.000)
Gross profit 108.000
Less: Operating expenses
▪ Selling expense 18.000
▪ Administrative expense 19.000
▪ Freight – out 13.000
(50.000)
Net Income 58.000

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 (b) Balance Sheet
Karim Book company
Balance sheet
At December 31, 2020
Current assets Liabilities
Cash 32.000 Accounts payable 12000
Accounts receivable 25.000
Ending inventory 22.000
79.000 Owner's equity
Capital 149.000
Fixed assets + Net income 58.000
Building 150.000 (–) Drawing (10.000)
(–) Accumulated depreciation (20.000) 197.000
130.000
209.000 209.000

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 Question (1) choose the best response
1. Naser company sold L.E 5000 of merchandise to Ahmed company, trade discount c
10% terms 3/10,n/30 and F.O.B shipping point. So ….
a) 10% Cash discount available for payment within 3 days
b) 10% trade discount available for payment within 3 days
c) 3 % Cash discount available for payment within 10 days
d) 3 % trade discount available for payment within 3 days
2. Credit terms 2/10, n/30 means that …… c
a) 10% cash discount available for payment within 2days
b) 10% trade discount available for payment within 2days
c) 2 % cash discount available for payment within 10 days
d) 2 % trade discount available for payment within 10 days
3. To record purchases returns & allowance for goods purchased on account under a
periodic system, the entry is :
a) Debit account payable and credit purchases returns & allowance
b) Debit purchases returns & allowance and credit account payable
c) Debit purchases returns & allowance and credit purchases
d) None of the above
4. To record sales returns & allowance for goods sold on account under periodic b
system, the entry is :
a) Debit accounts receivable and credit sales returns & allowance
b) Debit sales returns & allowance and credit account receivable
c) Debit sales returns & allowance and credit sales
d) None of the above
5. On May 3 Dina shop purchased merchandise of L.E 20000 on account from Murad a
company, terms 2/10,n/30. On May 15 Dina paid the proper amount to Murad
company. Then Murad’s cash
a) Debited by L.E 20000 b) Credited by L.E 20000
a) Debited by L.E 19600 b) Credited by L.E 19600
6. Jana stores sold L.E 10000 of merchandise on account to Ahmed shop, terms b
2/10,n/30, and F.O.B destination. Jana stores paid L.E 300 fright charge. Jana stores
recoded 300 as :
a) Freight in debited b) Freight out debited
c) accounts receivable debited d) None of the above
7. A company had L.E 800000 in net sales, L.E 350000 in gross profit and L.E c
200000 in operating expense. Cost of goods sold :
a) L.E250000 b) L.E 150000 c) L.E 450000 d) None of the above

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8. A company had L.E 800000 in sales, sales discounts of L.E 12000, sales returns &
allowances L.E 18000, cost of goods sold of L.E 380000 and L.E 265000 in
operating expense. Gross profit equals b
a) L.E 770000 b) L.E 390000 c) L.E 115000 d) L.E 125000
Net income equal:
a) L.E 770000 b) L.E 390000 c) L.E 115000 d) L.E 125000 d
9. Balances of sales L.E 100000, purchases of L.E 55000, purchases discount L.E a
3000, sales returns & allowances L.E 8000, freight in L.E 3000, beginning
inventory L.E 14000, ending inventory L.E 13000 and purchases returns and
allowances L.E 7000. Net purchase equals:
a) L.E 45000 b) L.E 48000 c) L.E 42000 d) None of the above
Question (2) true of false
1. Trade discount is a reduction in the sale price of goods that is granted for early ×
payment
2. F.O.B shipping point implies that ownership of goods transfer to the buyer at the ×
buyer’s place of business
3. Freight-in is an account that is subtracted from the purchases account to arrive at ×
cost of goods purchased.
4. Sales minus operating expenses equal gross profit. ×
5. Cost of goods sold includes the cost of all merchandise sold during the period; ×
therefore, it includes the cost of all merchandise remaining on hand at the end of
the accounting period.
6. The balance of merchandise in inventory at the end of current period is equal to the ✓
amount of beginning merchandise inventory for the next period.
7. At the of the period the merchandise inventory must be reported as an expense, ×
while the cost of goods sold is reported as an asset
8. If the beginning inventory is L.E 20000 , cost of goods purchased is L.E 29000, and ×
ending inventory is L.E 19000 , the cost of goods available for sales is L.E 30000
the cost of goods available for sales = 20000 + 29000 = 49000
9. If the beginning inventory is L.E 20000 , cost of goods purchased is L.E 29000, and ✓
ending inventory is L.E 19000 , the cost of goods sold is L.E 30000
the cost of goods sold = 20000 + 29000 - 19000 = 30000

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