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    Chapter 5 - Accounting For Merchandising Operations Practice Set A

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    Linh Linh
    This document provides information to prepare journal entries and financial statements for Lowe's and Valley Company, two merchandising businesses. It includes details of various purchases and sales transactions throughout August for Lowe's, and income statement categories and account balances as of August 31 for Valley Company. The exercise requires journalizing transactions, calculating financial statement amounts, and preparing multi-step and single-step income statements and closing entries for Valley Company.

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    Chapter 5 - Accounting For Merchandising Operations Practice Set A

    Uploaded by

    Linh Linh
    144 views2 pages
    This document provides information to prepare journal entries and financial statements for Lowe's and Valley Company, two merchandising businesses. It includes details of various purchases and sales transactions throughout August for Lowe's, and income statement categories and account balances as of August 31 for Valley Company. The exercise requires journalizing transactions, calculating financial statement amounts, and preparing multi-step and single-step income statements and closing entries for Valley Company.

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    Practice-Set-A (1)

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    This document provides information to prepare journal entries and financial statements for Lowe's and Valley Company, two merchandising businesses. It includes details of various purchases and sales transactions throughout August for Lowe's, and income statement categories and account balances as of August 31 for Valley Company. The exercise requires journalizing transactions, calculating financial statement amounts, and preparing multi-step and single-step income statements and closing entries for Valley Company.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    144 views2 pages

    Chapter 5 - Accounting For Merchandising Operations Practice Set A

    Uploaded by

    Linh Linh
    This document provides information to prepare journal entries and financial statements for Lowe's and Valley Company, two merchandising businesses. It includes details of various purchases and sales transactions throughout August for Lowe's, and income statement categories and account balances as of August 31 for Valley Company. The exercise requires journalizing transactions, calculating financial statement amounts, and preparing multi-step and single-step income statements and closing entries for Valley Company.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    CHAPTER 5 – ACCOUNTING FOR MERCHANDISING OPERATIONS

    PRACTICE SET A
    Exercise 5.1A

    Prepare journal entries to record the following merchandising transactions of Lowe’s, which uses the
    perpetual inventory system and the gross method.

    Aug 1 Purchased merchandise from Aron Company for $7,500 under credit terms of 1∕10,
    n∕30, FOB destination, invoice dated August 1.
    5 Sold merchandise to Baird Corp. for $5,200 under credit terms of 2∕10, n∕60, FOB
    destination, invoice dated August 5. The merchandise had cost $4,000.
    8 Purchased merchandise from Waters Corporation for $5,400 under credit terms of
    1∕10, n∕45, FOB shipping point, invoice dated August 8.
    9 Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp.
    10 Baird returned merchandise from the August 5 sale that had cost Lowe’s $400 and was
    sold for $600. The merchandise was restored to inventory.
    12 After negotiations with Waters Corporation concerning problems with the purchases
    on August 8, Lowe’s received a price reduction from Waters of $400 off the $5,400 of
    goods purchased. Lowe’s debited accounts payable for $400.
    14 At Aron’s request, Lowe’s paid $200 cash for freight charges on the August 1 purchase,
    reducing the amount owed (accounts payable) to Aron
    15 Received balance due from Baird Corp. for the August 5 sale less the return on August
    10.
    18 Paid the amount due Waters Corporation for the August 8 purchase less the price
    allowance from August 12.

    19 Sold merchandise to Tux Co. for $4,800 under credit terms of n∕10, FOB shipping point,
    invoice dated August 19. The merchandise had cost $2,400.

    22 Tux requested a price reduction on the August 19 sale because the merchandise did
    not meet specifications. Lowe’s gave a price reduction (allowance) of $500 to Tux and
    credited Tux’s accounts receivable for that amount.

    29 Received Tux’s cash payment for the amount due from the August 19 sale less the
    price allowance from August 22.

    30 Paid Aron Company the amount due from the August 1 purchase
    Exercise 5.2A
    Valley Company’s adjusted account balances from its general ledger on August 31, its fiscal year-end,
    follows. It categorizes the following accounts as selling expenses: Sales Salaries Expense, Rent
    Expense— Selling Space, Store Supplies Expense, and Advertising Expense. It categorizes the
    remaining expenses as general and administrative

    Beginning merchandise inventory was $25,400. Supplementary records of merchandising activities for
    the year ended August 31 reveal the following itemized costs.

    Requirement:
    1. Compute the company’s net sales for the year.
    2. Compute the company’s total cost of merchandise purchased for the year.
    3. Prepare a multiple-step income statement that includes separate categories for net sales, cost
    of goods sold, selling expenses, and general and administrative expenses.
    4. Prepare a single-step income statement that includes these expense categories: cost of goods
    sold, selling expenses, and general and administrative expenses.
    5. Prepare closing entries as of August 31.

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