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Examination Question and Answers, Set D (Problem Solving), Chapter 6 - Accounting For Merchandising Business

This document provides three accounting problems related to merchandising businesses. It includes journal entries for purchases and returns between a seller and buyer, ordering accounts in a chart of accounts, and preparing a multiple-step income statement from given financial information.

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John Carlos Doringo
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1K views2 pages

Examination Question and Answers, Set D (Problem Solving), Chapter 6 - Accounting For Merchandising Business

This document provides three accounting problems related to merchandising businesses. It includes journal entries for purchases and returns between a seller and buyer, ordering accounts in a chart of accounts, and preparing a multiple-step income statement from given financial information.

Uploaded by

John Carlos Doringo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 6—Accounting for Merchandising Businesses [Problem Solving]

1. Based on the information below, journalize the entries for the Seller and the Buyer. Both use a
perpetual inventory system.

(a) Seller sells Buyer on account merchandise costing $300 for $500, terms 2/10, net
30, FOB destination. The transportation charge is $50.
(b) Buyer returns as defective $200 worth of the $500 merchandise received. The
seller's cost is $120.
(c) Buyer pays within the discount period.

ANS:
(a)

Seller Buyer
Accounts Receivable 500 Merchandise 500
Inventory
Sales 500 Accounts Payable 500

Cost of Merchandise
Sold 300 NA
Merchandise
Inventory 300

Transportation Out 50 NA
Cash 50

(b)

Sales Returns & Accounts Payable 200


Allow. 200
Accounts Merchandise 200
Receivable 200 Inventory

Merchandise
Inventory 120
Cost of Merchandise
Sold 120

(c)

Cash 294 Accounts Payable 300


Sales 6 Merchandise 6
Discounts Inventory
Accounts 300 Cash 294
Receivable

DIF: 3 OBJ: 02d


2. Using the letter preceding each account, arrange the following selected accounts in the order
they would normally appear in a chart of accounts of a company that uses a multiple-step
income statement.

(a) Accounts Payable


(b) Accounts Receivable
(c) Merchandise Inventory
(d) Miscellaneous Selling Expense
(e) Sales Discounts
(f) Interest Expense
(g) Income Summary
(h) Misc. Admin. Expense
(i) Transportation Out
(j) Sales Returns and Allowances

ANS:
(b) (c) (a) (g) (j) (e) (i) (d) (h) (f)

DIF: 3 OBJ: 03

3. The following data for the current year ended June 30 were extracted from the accounting records
of Franks Co.:

Cost of merchandise sold $325,000


Operating expenses 85,000
Sales 475,000

Prepare a multiple-step income statement for the current year ended June 30.

ANS:

Franks Co.
Income Statement
For the Year Ended June 30, 20--
Sales $475,000
Cost of merchandise sold 325,000
Gross profit $150,000
Operating expenses 85,000
Net income $ 65,000
========

DIF: 1 OBJ: 04

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