chapter 6 study guide

Gross profit: During the current year, merchandise is sold for $450,000 cash and $1,350,000 on account. The cost of the merchandise sold is $1,100,000. What is the amount of the gross profit?

450,000 + 1,350,000= 1,800,000 1,800,000-1,100,000= 700,000 *sales - cost of merch sold= gross profit

Transactions for Buyer and Seller: Sundance Co. sold merchandise to Butterfield Co. on account, $16,800, terms 2/15, n/30. The cost of the merchandise sold is $12,600. Sundance Co. issued a credit memo for $3,800 for merchandise returned and later received the amount due within the discount period. The cost of the merchandise returned was $2,850. A. Journalize Sundance Co.'s entry for the payment of the amount due. For a compound transaction, if an amount box does not require an entry, leave it blank. B. Journalize Butterfield Co.'s entry for the payment of the amount due. For a compound transaction, if an amount box does not require an entry, leave it blank.

A. Cash: 12740 Sales Discounts: 260 Accounts Receivable-Butterfield Co.: 13000 *sold merchandise - credit memo= accounts receivable Accts receivable X term= discount accts recievable - discount = cash 16800-3800=13000 13000 X .02= 260 13000- 260=12740 B. Accounts Payable-Sundance Co. :13000 Merchandise Inventory: 260 Cash: 12740

Freight Terms: Determine the amount to be paid in full settlement of each of two 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 a.180,000 b. 88,000 Freight Paid by seller a.3,000 b.1250 Freight Terms a.FOB shipping point 1/10 n/30 b. FOB destination, 2/10, n/30 Return Allowance a.20,000 b.9,000

A. 161400 (shipping point) *merchandise -return allowance= merchandise purchsd merch purchased X term= discount merch purchsed - discount + shipping 180000-20000=16000 16000 X .01-= 1600 16000-1600 + 3000= 161400 b. 77420 (destination) *merchandise -return allowance= merchandise purchsd merch purchased X term= discount merch purchsed - discount 88000-9000=79000 79000 X .02 = 1580 79000 - 1580= 77420

Sales Transactions: a. Sold merchandise on account, $41,100 with terms 2/10, n/30. The cost of the merchandise sold was $26,750. b. Received payment less the discount. For a compound transaction, if an amount box does not require an entry, leave it blank.

A.Sale: Accounts Receivable 41100 Sales 41100 Cost: Cost of Merchandise Sold: 26750 Merchandise Inventory: 26750 B. Cash 40278 Sales Discounts 822 Accounts receivable 41100 *sold merch X term = sales discount sold merch - discount = cash

Inventory Sharing: Modern Furnishings Company's perpetual inventory records indicate that $890,000 of merchandise should be on hand on April 30, 2014. The physical inventory indicates that $876,250 of merchandise is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Modern Furnishings Company for the year ended April 30, 2014. Assume that the inventory shrinkage is a normal amount.

Apr. 30 Cost of Merchandise Sold: 13750 Merchandise Inventory: 13750 *890,000-876,250=13,750

Purchases Transactions: Xanadu Company purchased merchandise on account from a supplier for $12,650, terms 2/10, n/30. Xanadu Company returned $3,950 of the merchandise and received full credit. a. If Xanadu Company pays the invoice within the discount period, what is the amount of cash required for the payment? b. What account is credited by Xanadu Company to record the return?

a. $8526 *(purchased merch - returned merch) X term purchase merch- returned merch - discount (12650 - 3950) X .02= 174 12650-3950-174= 8526 b. merchandise inventory

Ratio of Net Sales to Assets: The following financial statement data for years ending December 31 for Latchkey Company are shown below. 2014 / 2013 Net sales 1,734,000 / 1,645,000 total assets Beginning of year 480,000 / 460,000 End of year 540,000 / 480,000 a. Determine the ratio of net sales to assets for 2014 and 2013. Round your answers to one decimal place. b. Does the change in the ratio of net sales to assets from 2013 to 2014 indicate a favorable or an unfavorable trend?

a. Ratio net sales to assets 2014 = 3.4 2013= 3.5 ** 48000+540,000=1,020,000 1020000/2=510,000 1734000/510000= 3.4 ** 460,000+480,000=940,000 940,000/2=470,000 1,645,000/470,000=3.5 b. unfavorable