Documente Academic
Documente Profesional
Documente Cultură
Accounting for
Merchandising Businesses
2
3
6-2
Fourth level
Describe
and illustrate the financial
Fifth level
statements
of a merchandising business.
the adjusting
and
closing
After
studying this
chapter, you
should
be able to:
4 Describe
process for a merchandising business.
6-3
1
Distinguish between the
activities and financial
statements of service and
merchandising businesses.
6-4
1
Nature of Merchandising
Businesses
Service Business
Fees earned
Operating expenses
Net income
6-5
$XXX
XXX
$XXX
1
Nature of Merchandising
Businesses
Merchandising Business
Sales
Cost of Merchandise Sold
Gross Profit
Operating Expenses
Net Income
6-6
$XXX
XXX
$XXX
XXX
$XXX
6-7
6-8
6-10
2
Describe and illustrate
the financial statements
of a merchandising
business.
6-11
2
Exhibit 1
6-14
6-15
6-16
6-17
6-18
2
Exhibit 1
6-22
6-23
2
Exhibit 2
6-24
6-27
2
Exhibit 1
MultipleStep
Income
Statement
(concluded)
6-28
2
Example Exercise 6-2
Cost of Merchandise Sold
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
6-29
6-29
$ 121,200
$985,000
44,500
$940,500
11,300
951,800
$1,073,000
142,000
$ 931,000
2
Exhibit 3
6-32
2
Exhibit 4
6-33
2
Exhibit 5
6-34
(Continued)
2
Exhibit 5
6-35
3
Describe and illustrate
the accounting for
merchandise
transactions including:
6-36
6-36
3
Sale of merchandise
Purchase of merchandise
Freight, sales taxes, and trade
discounts
Dual nature of merchandise
transactions
6-37
6-37
3
Exhibit 6
6-38
3
Cash Sales
On January 3, NetSolutions sold $1,800 of
merchandise for cash.
6-39
3
Cash Sales
Using the perpetual inventory system, the cost
of merchandise sold and the decrease in
merchandise inventory are recorded. The cost
of merchandise sold on January 3 is $1,200.
6-40
3
Credit Card Sales
Sales made to customers using credit cards
are recorded as cash sales. Assume that
NetSolutions paid credit card processing fees
of $48 on January 1.
6-41
3
Sales on Account
On January 12, NetSolutions sold merchandise
on account for $510. The cost of merchandise
sold was $280.
6-42
Sales Discounts
The terms for when payments for
merchandise are to be made, are called credit
terms. If payment is required on delivery, the
terms are cash or net cash. Otherwise, the
buyer is allowed an amount of time, known
as the credit period, in which to pay.
6-43
3
Exhibit 7
Invoice
Wireless
PC Card
6-44
3
Exhibit 8
6-45
Credit Terms
3
Receipts on Account
On January 22, NetSolutions receives the
amount due, less the 2 percent discount.
$1,500 x .02
6-46
Credit Memorandum
6-47
3
Exhibit 9
6-48
Credit Memo
3
On January 13, issued Credit Memo 32 to Krier
Company for merchandise returned to NetSolutions.
Selling price, $225; cost to NetSolutions, $140.
6-49
3
Example Exercise 6-3
Sales Transactions
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.
6-50
6-50
Sales..
7,500
Sales Discounts
Accounts Receivable.
150
7,500
3
Purchase Merchandise
for Cash
6-52
3
Purchase Merchandise
on Account
*
6-55
YES
$60.00
9.80
$50.20
3
3
Discount Taken
6-56
6-57
6-58
3
Exhibit 10
6-60
Debit Memo
6-62
Price Allowance
6-63
6-64
6-65
3
Example Exercise 6-4
Purchase Transactions
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.
6-66
6-66
6-67
6-67
Freight
6-68
3
On June 10, NetSolutions buys merchandise from
Magna Data on account, $900, terms FOB shipping
point and pays the transportation cost of $50.
6-69
6-70
6-71
6-72
6-73
6-74
3
Exhibit 11
6-75
Freight Terms
3
Example Exercise 6-5
Freight Terms
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.
Merchandise
Freight
Paid by Seller
a.
$4,500
$200
b.
$5,000
60
6-76
6-76
Freight Terms
FOB shipping point,
1/10, n/30
FOB destination,
2/10, n/30
Returns and
Allowances
$ 800
2,500
a.
b.
6-77
6-77
3
Sales Taxes
6-78
3
Sales Taxes
6-79
Trade Discounts
3
Dual Nature of Merchandise 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.
6-81
3
Scully Company (Seller)
4,500
4,500
Merchandise Inventory.
Accounts PayableScully Co.
6-82
7,500
7,500
6-83
3
Scully Company (Seller)
No entry.
Merchandise Inventory
Cash
6-84
150
150
6-85
3
Scully Company (Seller)
3,500
3,500
Merchandise Inventory.
Accounts PayableScully Co.
6-86
5,000
5,000
6-87
3
Scully Company (Seller)
Delivery Expense
Cash
No entry.
6-88
250
250
3
Scully Company (Seller)
Merchandise Inventory
Cost of Merchandise Sold
700
700
6-90
1,000
1,000
6-91
3
Scully Company (Seller)
Cash
4,000
Accounts ReceivableBurton Co.
4,000
6-92
4,000
4,000
3
Scully Company (Seller)
Merchandise Inventory
12,500
Accounts PayableScully Co.
12,500
6-94
6-95
3
Scully Company (Seller)
Cash
12,260
Sales Discounts
240
Accounts ReceivableBurton Co.
12,500
Burton Company (Buyer)
12,500
240
12,260
3
Example Exercise 6-6
Transactions for Buyer and Seller
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 payment of the amount
due.
6-97
6-97
4
Describe the adjusting
and closing process for
a merchandising
business.
6-99
6-99
6-101
6-102
6-103
4
Step 2: Closing Entries
Credit each temporary account with a debit balance, such as an
expense, for the balance and credit Income Summary.
6-104
6-105
6-106
4
NetSolutions Income Summary account after the
closing entries have been posted is as follows:
6-107
4
Example Exercise 6-7
Inventory Shrinkage
Pulmonary Companys perpetual inventory
records indicate that $382,800 of merchandise
should be on hand on March 31, 2010. 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,
2010.
6-108
6-108
6-109
6-109
Appendix 1:
Accounting Systems for
Merchandisers
6-110
6-110
6-111
Type of Transaction
Sales on account
Purchases on
account
Cash receipts
Cash payments
Exhibit 12
6-112
Exhibit 13
6-113
Exhibit 14
6-114
Exhibit 15
6-115
Exhibit 16
6-116
Exhibit 17
6-117
Appendix 2:
The Periodic Inventory
System
6-118
6-118
Exhibit 18
6-119
Exhibit 19
6-120
Exhibit 20
6-121
Exhibit 20
6-122
6-123
6-124