Solution manual fundamentals of accounting by cabrera chapter 11

Chapter 11 Accounting for Merchandising Activities Exercises Exercise Exercise Exercise Exercise Exercise Exercise Exercise Exercise Matching Type 7 10 11 Test Material Test Material 11-1 Requirement (1) June 12 12 15 16 18 18 22 22 24 24 Inventory Accounts Payable 16,100 Accounts Payable (P16,100 x 0.40) Inventory 6,440 Cash Sales Revenue 9,200 Cost of Goods Sold Inventory 5,500 Inventory (P51,000 – P1,000) Accounts Payable 5,000 Inventory Cash 2,600 Accounts Receivable Sales Revenue 20,000 Cost of Goods Sold Inventory 11,800 Sales Returns and Allowances Accounts Receivable 8,000 Inventory Cost of Goods Sold 4,800 Cash [P50,000 – 0.03 (P50,000)] Note Payable 48,500 Accounts Payable Inventory (P50,000 x 0.03) Cash (P50,000 x 0.97) 50,000 16,100 6,440 9,200 5,500 5,000 2,600 20,000 11,800 8,000 4,800 48,500 1,500 48,500 June 28 29 30 Cash [(P20,000 – P8,000) x 0.98] Sales Discounts [(P20,000 – P8,000 x 0.02)] Accounts Receivable (P20,000 – P8,000) 11,760 240 12,000 Accounts Payable (P16,100 – P6,440) Cash 9,660 Inventory (P9,000 – P350) Cash 8,650 9,660 8,650 Requirement (2) June Bal 15 16 22 39 Inventory 16,100 June 50,000 12 2,600 18 4,800 24 8,650 56,910 6,440 5,500 11,800 1,500 June 12 18 Bal Cost of Goods Sold 5,500 June 22 11,800 12,500 4,800 Requirement (3) The decision to borrow funds was wise because the discount (P1,500) exceeded the interest paid on the amount borrowed (P950) Thus the entity was P550 better off as a result of its decision Test Material 11-2 a The operating cycle of a merchandising company consists of purchasing merchandise, selling that merchandise to customers (often on account), and collecting the sales proceeds from these customers In the process, the business converts cash into inventory, the inventory into accounts receivable, and the accounts receivable into cash b Journal entries assuming use of a perpetual inventory system: GENERAL JOURNAL Date 2009 Jan 3 c Account Titles and Explanation Cash Sales Sold tracking system Palace Mountain Resort Cost of Goods Sold Inventory To record cost merchandise sold Debit 200,000 to 112,000 of Inventory Accounts Payable (Hun Corp.) Purchased merchandise Terms 2/10, n/30; net cost, P98,000 (P100,000 less 2%) Credit 200,000 112,000 98,000 98,000 The debits and credits to the Inventory account should be posted to the appropriate accounts in the inventory subsidiary ledger The information posted would be the costs and quantities of the types of merchandise purchased or sold The account payable to Hun also should be posted to the Hun account in K-Star’s accounts payable ledger No postings are required to the accounts receivable ledger, as this was a cash sale If K-Star maintains more than one bank account, however, the debit to cash should be posted to the proper account in the cash subsidiary ledger d P426,000 (P440,000 beginning balance, less P112,000, plus, P98,000) e Journal entries assuming use of a periodic inventory system: GENERAL JOURNAL Date 2009 Jan f Account Titles and Explanation Cash Sales Sold tracking system Palace Mountain Resort Debit Credit 200,000 to Purchases Accounts Payable (Hun Corp.) Purchased merchandise Terms 2/10, n/30; net cost, P98,000 (P100,000 less 2%) 98,000 200,000 98,000 Computation of the cost of goods sold: Inventory, January Add: Purchases Cost of goods available for sale Less: Inventory, January (per part d) Cost of goods sold P440,000 98,000 P538,000 426,000 P112,000 g K-Star should use a perpetual inventory system The items in its inventory have a high per-unit cost Therefore, management will want to know the costs of the individual products included in specific sales transactions and will want to keep track of the items in the stock Although the company has a manual accounting system, its volume of sales transactions is low enough that maintaining a perpetual inventory record will not be difficult h Gross profit = = = Sales revenue – Cost of goods sold P200,000 – P112,000 P88,000 Gross profit margin = = = Gross profit  Sales revenue P88,000  P200,000 44% ... better off as a result of its decision Test Material 11- 2 a The operating cycle of a merchandising company consists of purchasing merchandise, selling that merchandise to customers (often on... inventory record will not be difficult h Gross profit = = = Sales revenue – Cost of goods sold P200,000 – P112,000 P88,000 Gross profit margin = = = Gross profit  Sales revenue P88,000  P200,000 44%... specific sales transactions and will want to keep track of the items in the stock Although the company has a manual accounting system, its volume of sales transactions is low enough that maintaining