Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 5, Problem 3QS
1.
To determine
Compute (1) Goods available for sale, (2) Cost of goods sold and (3) Gross profit for Company KM (merchandising firm).
2.
To determine
Compute net income for each company.
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Use the following information (in random order) from a merchandising company and from a service company. Hint: Not all information may be necessary for the solutions. a. For the merchandiser only, compute (1) goods available for sale, (2) cost of goods sold, and (3) gross profit. b. Compute net income for each company. Kleiner Merchandising Company Accumulated depreciation $ 700 Expenses $1,450 Beginning inventory . . . . . . . . 5,000 Net purchases 3,900 Ending inventory 1,700 Net sales . 9,500 Krug Service Company Expenses $12,500 Prepaid rent . $ 800 Revenues 14,000 Accounts payable . 200 Cash 700 Equipment . 1,300
SLO-5.1.
for a merchandising business is
determined by subtracting the Cost of Goods Sold from the
Sale Income account.
OOperating Income
ONet Income
OGross Profit
OMerchandise Available for Sale
Current Attempt in Progress
You have the following information for Blossom Company Blossom uses the periodic method of accounting for its inventory
transactions, Blossom only carries one brand and size of diamonds-all are identical Each hatch of diamonds purchased is carefully
coded and marked with its purchase cost
March 1
March 3
March 5
March 10
March 25
✓ Your answer is correct
Beginning inventory 140 diamonds at a cost of $300 perdiamond
Purchased 190 diamonds at a cost of $340 each
Sold 170 diamonds for $600 each.
Purchased 320 diamonds at a cost of $365 each
Sold 300 damonds for $650 each.
Assume that Blossom uses the specific identification cost flow method.
Demonstrate how Blossom could maximize its gross profit for the month by specifically selecting which diamonds to sell
on March 5 and March 25
(1)
(2)
To maximize gross profit, Blossom should sell the diamonds with the
lowest cost
Demonstrate how Blossom could minimize its gross profit for the month by selecting which…
Chapter 5 Solutions
Principles of Financial Accounting.
Ch. 5 - Prob. 1MCQCh. 5 - Prob. 2MCQCh. 5 - Prob. 3MCQCh. 5 - Prob. 4MCQCh. 5 - A companys net sales are 675,000, its cost of...Ch. 5 - Prob. 1DQCh. 5 - In comparing the accounts of a merchandising...Ch. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - How does a company that uses a perpetual inventory...
Ch. 5 - Distinguish between cash discounts and trade...Ch. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - What is the difference between the single-step and...Ch. 5 - APPLE Refer to the balance sheet and income...Ch. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - QUICK STUDY Applying merchandising terms C1 P1...Ch. 5 - Identifying inventory costs Costs of 5,000 were...Ch. 5 - Prob. 3QSCh. 5 - Question: Compute the amount to be paid for each...Ch. 5 - Recording purchases, returns, and discounts taken...Ch. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Accounting for shrinkageperpetual system P3 Nix'It...Ch. 5 - Closing entries P3 Refer to QS 4-9 and prepare...Ch. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Prob. 13QSCh. 5 - Computing and interpreting acid-test ratio Use the...Ch. 5 - Prob. 15QSCh. 5 - Contrasting periodic and perpetual systems...Ch. 5 - Prob. 17QSCh. 5 - Prob. 18QSCh. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - Prob. 23QSCh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Recording purchases, purchases returns, and...Ch. 5 - Recording sales, purchases. and cash...Ch. 5 - Prob. 7ECh. 5 - Inventory and cost of sales transactions in...Ch. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Impacts of inventory error on key accounts P3 A...Ch. 5 - Impacts of inventory error on key accounts P3 A...Ch. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Recording purchases, returns, and allowances...Ch. 5 - Recording sales, purchases, and cash...Ch. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Recording estimates of future returns P6 Chico...Ch. 5 - Prob. 22ECh. 5 - Recording sates, purchases. shipping. and...Ch. 5 - Recording purchases, sales, returns, and...Ch. 5 - Prob. 25ECh. 5 - Preparing journal entries for merchandising...Ch. 5 - Prob. 2APCh. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Preparing journal entries for merchandising...Ch. 5 - Prob. 2BPCh. 5 - Prob. 3BPCh. 5 - Prob. 4BPCh. 5 - The following unadjusted trial balance is prepared...Ch. 5 - This serial problem began in Chapter 1 and...Ch. 5 - Prob. 1AACh. 5 - Prob. 2AACh. 5 - Prob. 3AACh. 5 - Prob. 1BTNCh. 5 - You are the financial officer for Music Plus, a...Ch. 5 - Prob. 3BTNCh. 5 - Prob. 5BTN
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- The revenue account for a merchandising business is typically called ___________. Group of answer choices inventory sales. unearned revenue. fees earned. sales or sales of merchandise.arrow_forwardWhich account does a merchandiser use that a service company does not use? a. Cost of Goods Sold b. Merchandise Inventory c. Sales Revenue d. All of the abovearrow_forwardCherokee Incorporated is a merchandiser that provided the following information: Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement. Required 1 Required 2 Prepare a traditional income statement. Complete this question by entering your answers in the tabs below. Sales Cost of goods sold Gross margin Selling and administrative expenses: Cherokee, Incorporated Traditional Income Statement Prepare a contribution format income statement. Cherokee, Incorporated Contribution Format Income Statement Variable expenses: Fixed expenses: Amount 0 14,000 $ 16 $1 $3 0 $ 18,000 $ 14,000 $ 11,000 $ 23,000 $ 87,000 $ 224,000 0arrow_forward
- Directions: Read the given sentences carefully. Select the best answer from the choices given below. Write your answer on the space provided before each item. Gains Purchases Sales Income Gross Profit Sales Discount Selling expenses Professional Fee Net Income Operating expenses Sales return Cost of Goods Sold Service Income 1. An example of service revenue. 2. The revenue generated from the sale of products. 3. It is computed by deducting the cost of sales from net sales. 4. It is used to describe revenue derived from the rendering of services. 5. A type of income derived from the other activities of the business. 6. The account used to report the acquisitions of merchandise for sale. 7. It represents the actual cost of inventories that the company was able to sell. 8. These are expenses that are directly related to the main purpose of a merchandising business 9. A contra-sales account that is used to report the amount of discount given to or taken by the customers. 10. It refers…arrow_forwardFinancial information is presented here for Sheridan Company. Sales revenue Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses Net income (a) Compute the missing amounts. Sales revenue Sales returns and allowances Net sales Cast of goods sold Gross profit Operating expenses Net income 4,600 73,600 27,968 11,776 $ 10 $ 10 $ 10 4,600 73,600 27,968 11,776arrow_forwardOn the income statement of a merchandising company, interest income and interest expense are reported: Question 8 options: A) As part of cost of goods sold B) By offsetting interest income and interest expense and showing the excess as an operating revenue or expense C) By showing interest income as additional sales revenue and interest expense as an operating expense D) As separate items of other income and expense below the net operating income or lossarrow_forward
- A merchandising business purchases goods for resale. A merchandiser makes a profit by selling goods at a price higher than the cost of the goods sold. While the underlying business transaction is straightforward, determining of the cost of the merchandise sold often requires an inventory cost flow assumption when similar units are purchased at different units costs during the period. Identify cost flow assumptions to their description: Cost Flow Assumption (choose between FIFO,LIFO, weighted average, or specific identication) Description Cost flow is the reverse order in which the costs were incurred. Cost flow is the order in which the costs were incurred. Cost flow is an average of the purchase costs. Unit cost is identified with a specific purchase Often, specification identification may not be practical, so one of the other three cost flow assumptions is assumed. The cost flow assumption can be applied under either the perpetual or periodic inventory system.arrow_forwardQ-1: The following accounts are included in the ledger of David Company: Advertising expense Freight-in Inventory Purchases Purchase returns and allowances Sales Sales returns and allowances Which of the accounts would be included in calculating cost of goods sold?arrow_forward1. In a merchandising business, operating income plus operating expenses is equal to a.cost of merchandise available for sale b.gross profit c.cost of merchandise sold d.sales 2. Which of the following items should notbe included in the cost of ending merchandise inventory? a.sold units in transit, not invoiced, and shipped FOB destination b.purchased units in transit, shipped FOB shipping point c.purchased units in transit, shipped FOB destination d.units on hand in the warehousearrow_forward
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