accounting chapter 5 and 6

whats on multiple step income statement

sales: less discount less returns =net sales -cogs =gross profit - selling expense - general expense = net sales

shrinkage

term used to refer to the loss of inventory- figure out by subtracting merchandise inventory from actual inventory available

AUG 5.Sold merchandise to Laird Corp. for $4,340 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,099.

account receivable- laird (debit) sales (credit

journal entry allowance

accounts payable (debit) merchandise inventory (credit)

journal paying for purchase with discount and allowance

accounts payable (debit) merchandise inventory (credit) discount price cash (credit)

At Arotek's request, Sheng paid $480 cash for freight charges on the August 1 purchase, reducing the amount owed to Arotek.

accounts payable arotek (debit) cash (credit)

After negotiations with Waters Corporation concerning problems with the merchandise purchased on August 8, Sheng received a credit memorandum from Waters granting a price reduction of $831.

accounts payable water- (debit) merchandise inventory (credit)

Purchased merchandise from Lyon Company under the following terms: $5,900 price, invoice dated April 2, credit terms of 2/15, n/60, and FOB shipping point.

accounts payable- lyon (debit) 5900 merchandise inventory (credit) 5900

Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $26,900 and credit terms of 2/10, n/60. RECORD FOR MESA COMPANY!!

accounts receivable (debit) 26900 sales (credit) 26900

Received balance due from Laird Corp. for the August 5 sale less the return on August 10.

cash (debit) sales discount (debit) accounts receivable- laird (credit)

Santa Fe paid within the discount period. RECORD FOR MESA COMPANY

cash (debit) 26362 sales discount (debit) 538 accounts receivable (credit) 26900

Record cost of merchandise sold, $3,099.

cogs (debit) merchandise inventory (credit)

record journal entry for shrinkage

cost of goods sold (debit) merchandise inventory (credit)

The merchandise had cost Mesa $18,346. RECORD FOR MESA COMPANY

cost of goods sold (debit) 18346 merchandise inventory (credit) 18346

inventory turnover

cost of goods sold/ average inventory

current ratio

current assets/ current liabilities

acid test ratio

current quick assets (cash, short term investments, current receivables/ current liabilities

high number frequency in inventory turnover

equals better inventory management

balance sheet (overstated ending inventory)

equals overstated ASSETS and overstated EQUITY

income statement (overstated banning inventory)

equals overstated COGS and understated NET INCOME

income statement (understood ending inventory)

equals overstated COGS and understated NET INCOME

balance sheet (understated ending inventory)

equals understated ASSETS and understated EQUITY

income statement (overstated ending inventory)

equals understated COGS and overstated NET INCOME

income statement (understated beginning inventory)

equals understated COGS and overstated NET INCOME

income statement

for year end

Purchased merchandise from Waters Corporation for $5,500 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. The invoice showed that at Sheng's request, Waters paid the $240 shipping charges and added that amount to the bill.

merchandise inventory (credit ) 5500 accounts payable-waters (credit)

Paid $330 for shipping charges on the April 2 purchase.

merchandise inventory (credit) cash (debit)

Purchased merchandise from Arotek Company for $6,200 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

merchandise inventory (debit account payable- armtek(credit)

The merchandise, which had cost $516, was restored to inventory.

merchandise inventory (debit) cogs (credit)

single step income statement

net sales -general expenses - selling expenses -cogs = net income

reporting income merchandise business

net sales- cogs=gross profit-expenses= net income

reporting income service business

revenue- expenses = net income

Laird returned merchandise from the August 5 sale that had been sold for $723.

sales return and allowance (DEBIT) accounts receivable laird (credit)

Compute the company's net sales for the year.

sales- discounts- returns& allowances