Chapter 6 Merchandising Activities
Ex. 6.4
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PROBLEM 6.1A
General Journal (1) Nov. 5 Accounts receivable (Bemidji Construction) 13,390 Sales Sold merchandise on account. 5 Cost of Good Sold 9,105 Inventory To record the cost of goods sold relating to the sales of merchandise to Bemidji Construction. 9 Inventory 3,800 Accounts Payable (Owatonna Tool Co.) Purchased merchandise on credit. Dec. 5 Cash 13,390 Accounts Receivable (Bemidji Construction) Collected accounts receivable. 9 Accounts Payable (Owatonna Tool. Co.) 3,800 Cash Paid account payable to supplier. 31 Cost of Goods Sold 1,710 Inventory To adjust inventory records to reflect the results of the year-end physical count. $ Inventory per accounting records 183,790 182,080 Inventory per physical count $ 1,710 Adjustment for inventory shrinkage a.
13,390 9,105 3,800 13,390 3,800 1,710 2
Claypool earned a gross profit rate of 32%, which is significantly higher than the industry average. Claypool’s sales were above the industry average, and it earned $77,968 more gross profit than the “average” store of its size. This higher gross profit was earned even though its cost of goods sold was $18,000 to $20,000 higher than the industry average because of the additional transportation charges. To have a higher-than-average cost of goods sold and still earn a much larger-than-average amount of gross profit, Claypool must be able to charge substantially
higher sales prices than most hardware stores. Presumably, the company could not charge such prices in a highly competitive environment. Thus, the remote location appears to insulate it from competition and allow it to operate more profitably than hardware stores with nearby competitors.
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PROBLEM 6.5A
a. Feb . General Journal 10,000 Journal entries by Siogo Shoes: 9 Accounts Receivable (Sole Mates) 10,000 b. Sales Sold merchandise on account; terms, 1/10, n/30. 9 Cost of Goods Sold 6,000 6,000 Inventory To record cost of merchandise sold (100 pr. X $60/pr.). 40 40 ## Delivery Expense Cash Paid delivery charges on outbound shipment. ## Sales Returns & Allowances 1,000 1,000 Accounts Receivable (Sole Mates) Customer returned merchandise (10 pr. X $100/pr.). 600 600 ## Inventory Cost of Goods sold Reduce cost of goods sold for cost of merchandise 8,910 90 9,000 returned (10 pr. X $60/pr.). ## Cash Sales Discount Accounts Receivable (Sole Mates) Collected amount due, less $1,000 return and less 9,900 9,900 Feb. 1% cash discount on remaining $9,000 balance. Journal entries by Sole Mates: 9 Inventory
Accounts Payable (Siogo Shoes) Purchased 100 pairs of boots; terms. 1/10, n/30. 4
Net c.
cost, $99 per pair ($100, less 1%). ## Transportation-in 40 40 Cash Paid transportation charge on inbound shipment. 990 990 ## Accounts Payable (Siogo Shoes) Inventory Returned 10 pairs of boots to supplier. (Net cost, $99 per pair x 10 pairs = $990. General Journal 8,910 Feb . ## Accounts Payable (Siogo Shoes) 8,910 Cash Paid within discount period balance owed to Siogo Shoes ($9,900 - $990 = $8,910). Yes. Sole Mates should take advantage of 1/10, n/30 purchase discounts, even if it must borrow money for a short period of time at an annual rate of 11%. By taking advantage of the discount, the company saves 1% by making payment 20 days early. At an interest rate of 11% per year, the bank charges only 0.6%
interest over a 20-day period (11% X 20/365 = 0.6%). Thus, the cost of passing up the discount is greater than the cost of short-term borrowing.
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Chapter 7 Financial assets
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Chapter 8 Inventories and the cost of goods sold
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Supplementary Problem
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Chapter 9
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