Cost of merchandise sold,

Chapter 5 Accounting for Merchandising Businesses

255 Appendix EX 5-37 Rules of debit and credit for periodic inventory accounts Complete the following table by indicating for a through g whether the proper answer is debit or credit. Account Increase Decrease Normal Balance Purchases debit a b Purchases Discounts credit c credit Purchases Returns and Allowances d e f Freight In debit g debit Appendix EX 5-38 Journal entries using the periodic inventory system The following selected transactions were completed by Air Systems Company during January of the current year. Air Systems Company uses the periodic inventory system. Jan. 2. Purchased 18,200 of merchandise on account, FOB shipping point, terms 215, n30. 5. Paid freight of 190 on the January 2 purchase. 6. Returned 2,750 of the merchandise purchased on January 2. 13. Sold merchandise on account, 37,300, FOB destination, 110, n30. The cost of merchandise sold was 22,400. 15. Paid freight of 215 for the merchandise sold on January 13. 17. Paid for the purchase of January 2 less the return and discount. 23. Received payment on account for the sale of January 13 less the discount. Journalize the entries to record the transactions of Air Systems Company. Appendix Ex 5-39 Journal entries using perpetual inventory system Using the data shown in Exercise 5-38, journalize the entries for the transactions, assum- ing that Air Systems Company uses the perpetual inventory system. Appendix Ex 5-40 Closing entries using periodic inventory system United Rug Company is a small rug retailer owned and operated by Pat Kirwan. After the accounts have been adjusted on December 31, the following selected account balances were taken from the ledger: Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 Freight In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Merchandise Inventory, December 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,000 Merchandise Inventory, December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,000 Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,760,000 Purchases Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 Purchases Returns and Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300,000 Sales Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Sales Returns and Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Journalize the closing entries on December 31. Problems Series A PR 5-1A Purchase-related transactions OBJ. 2 The following selected transactions were completed by Capers Company during October of the current year: Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook andor eChapters. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 256

Chapter 5 Accounting for Merchandising Businesses