Fundamental-Accounting-Principles-(5)

AccountingforMerchandisingOperationsChapter5PowerPointEditor:BethKane,MBA,CPACopyright©2015McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.05-C1:MerchandisingActivities25-3Serviceorganizationsselltimetoearnrevenue.Examples:Accountingfirms,lawfirms,andplumbingservicesServiceCompaniesC135-4ManufacturerWholesalerRetailerConsumersMerchandisingCompaniesMerchandiserC145-5C1ReportingIncomeforaMerchandiserMerchandisingcompaniessellproductstoearnrevenue.Examples:sportinggoods,clothing,andautopartsstores505-C2:ReportingInventoryforaMerchandiser65-7OperatingCycleforaMerchandiserBeginswiththepurchaseofmerchandiseandendswiththecollectionofcashfromthesaleofmerchandise.C275-8InventorySystemsC285-9PerpetualsystemscontinuallyupdateaccountingrecordsformerchandisingtransactionsPeriodicsystemsaccountingrecordsrelatingtomerchandisetransactionsareupdatedonlyattheendoftheaccountingperiodC2InventorySystems905-P1:AccountingforMerchandisePurchases10MerchandisePurchasesOnNovember2,Z-Martpurchased$1,200ofmerchandiseinventoryforcash.P111TradeDiscountsP1125-13PurchaseDiscountsAdeductionfromtheinvoicepricegrantedtoinduceearlypaymentoftheamountdue.P1135-142/10,n/30DiscountPercentNumberofDaysDiscountIsAvailableOtherwise,Net(orAll)IsDuein30DaysCreditPeriodPurchaseDiscountsP1145-15OnNovember2,Z-Martpurchased$1,200ofmerchandiseinventoryonaccount,credittermsare2/10,n/30.PurchaseDiscountsP1155-16OnNovember12,Z-MartpaidtheamountdueonthepurchaseofNovember2.PurchaseDiscountsP1165-17PurchaseDiscountsAfterweposttheseentries,theaccountsinvolvedlooklikethese:P1175-18PurchaseReturnsandAllowancesPurchaseReturn...Merchandisereturnedbythepurchasertothesupplier.PurchaseAllowance...Areductioninthecostofdefectiveorunacceptablemerchandisereceivedbyapurchaserfromasupplier.P1185-19OnNovember15,Z-Mart(buyer)issuesa$300debitmemorandumforanallowancefromTrexfordefectivemerchandise.PurchaseReturnsandAllowancesP1195-20Z-Martpurchases$1,000ofmerchandiseonJune1withterms2/10,n/60.Twodayslater,Z-Martreturns$100ofgoodsbeforepayingtheinvoice.WhenZ-MartlaterpaysonJune11,ittakesthe2%discountonlyonthe$900remainingbalance.PurchaseReturnsandAllowancesP1205-21TransportationCostsandOwnershipTransferP1215-22TransportationCostsZ-MartpurchasedmerchandiseontermsofFOBshippingpoint.Thetransportationchargeis$75.P1225-23AccountingforMerchandiseP123NEED-TO-KNOWOct.1Oct.3Paid$30cashforfreightchargesfromUPSfortheOctober1purchase.Oct.7Returned50defectiveunitsfromtheOctober1purchaseandreceivedfullcredit.Oct.11PaidtheamountduefromtheOctober1purchase,lessthereturnonOctober7.Oct.31Preparejournalentriestorecordeachofthefollowingpurchasestransactionsofamerchandisingcompany.Assumeaperpetualinventorysystem.Purchased125unitsofaproductatacostof$4perunit.Termsofthesaleare2/10,n/30,andFOBshippingpoint;theinvoiceisdatedOctober1.AssumetheOctober11paymentwasnevermadeand,instead,paymentoftheamountdueontheOctober1purchase,lessthereturnonOctober7,occurredonOctober31.P1P124NEED-TO-KNOWOct.1Oct.3Paid$30cashforfreightchargesfromUPSfortheOctober1purchase.Oct.7Returned50defectiveunitsfromtheOctober1purchaseandreceivedfullcredit.Oct.11PaidtheamountduefromtheOctober1purchase,lessthereturnonOctober7.Purchased125unitsofaproductatacostof$4perunit.Termsofthesaleare2/10,n/30,andFOBshippingpoint;theinvoiceisdatedOctober1.Oct.1500Oct.1500Oct.330Oct.7200Oct.7200Oct.11300Oct.116Oct.31324DateDebitCreditOct.1Merchandiseinventory(125units@$4)500Accountspayable500Oct.3Merchandiseinventory30Cash30Oct.7Accountspayable(50units@$4)200Merchandiseinventory(50units@$4)200Oct.11Accountspayable300Merchandiseinventory($300x.02)6Cash294GeneralJournalMerchandiseinventoryAccountspayableP125NEED-TO-KNOWOct.1Oct.3Paid$30cashforfreightchargesfromUPSfortheOctober1purchase.Oct.7Returned50defectiveunitsfromtheOctober1purchaseandreceivedfullcredit.Purchased125unitsofaproductatacostof$4perunit.Termsofthesaleare2/10,n/30,andFOBshippingpoint;theinvoiceisdatedOctober1.Oct.31AssumetheOctober11paymentwasnevermadeand,instead,paymentoftheamountdueontheOctober1purchase,lessthereturnonOctober7,occurredonOctober31.Oct.1500Oct.1500Oct.330Oct.7200Oct.7200Oct.31300Oct.31330DateDebitCreditOct.1Merchandiseinventory(125units@$4)500Accountspayable500Oct.3Merchandiseinventory30Cash30Oct.7Accountspayable200Merchandiseinventory(50units@$4)200Oct.31Accountspayable300Cash300GeneralJournalMerchandiseinventoryAccountspayableP12605-P2:AccountingforMerchandiseSales275-28AccountingforMerchandiseSalesP2285-29SalesofMerchandiseP2Eachsalestransactionforasellerofmerchandiseinvolvestwoparts:Revenuereceivedintheformofanassetfromacustomer.Recognitionofthecostofmerchandisesoldtoacustomer.295-30Z-Martsold$2,400ofmerchandiseoncredit.ThemerchandisehasacostbasistoZ-Martof$1,600.SalesofMerchandiseP2305-31SalesDiscountsP2Salesdiscountsoncreditsalescanbenefitasellerbydecreasingthedelayinreceivingcashandreducingfuturecollectionefforts.315-32Z-Martcompletesa$1,000creditsalewithtermsof2/10,n/60.SalesDiscountsP2Theaccoun