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Chapter 5 Accounting for Merchandising Businesses

Integrity, Objectivity, and Ethics in Business THE COST OF EMPLOYEE THEFT One survey reported that the 23 largest U.S. retail store chains have lost over 7 billion to shoplifting and employee theft. The stores apprehended over 1 million shoplifters and dishonest employees and recovered more than 148 million from these thieves. Approximately 1 out of every 33 employees was apprehended for theft from his or her employer. Each dishonest employee stole approximately 6 times the amount stolen by shoplifters 639.99 vs. 108.46. Source: Jack L. Hayes International, 23rd Annual Retail Theft Survey, 2011. A P P E N D I X The Periodic Inventory System Throughout this chapter, the perpetual inventory system was used to record pur- chases and sales of merchandise. Not all merchandise businesses, however, use the perpetual inventory system. For example, small merchandise businesses, such as a local hardware store, may use a manual accounting system. A manual perpetual in- ventory system is time consuming and costly to maintain. In this case, the periodic inventory system may be used. Cost of Merchandise Sold Using the Periodic Inventory System In the periodic inventory system, sales are recorded in the same manner as in the perpetual inventory system. However, the cost of merchandise sold is not recorded on the date of sale. Instead, the cost of merchandise sold is determined at the end of the period as shown in Exhibit 12 for NetSolutions . Merchandise inventory, January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . 59,700 Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,980 Less: Purchases returns and allowances . . . . . . . . . . . . . . . . . . . . . . . 9,100 Purchases discounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,525 11,625 Net purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510,355 Add freight in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,400 Cost of merchandise purchased . . . . . . . . . . . . . . . . . . . . . . . . . 527,755 Merchandise available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,455 Less merchandise inventory, December 31, 2015. . . . . . . . . . . . . . 62,150 Cost of merchandise sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,305 E X H I B I T 1 2 Determining Cost of Merchandise Sold Using the Periodic System Chart of Accounts Under the Periodic Inventory System The chart of accounts under a periodic inventory system is shown in Exhibit 13. The accounts used to record transactions under the periodic inventory system are highlighted in Exhibit 13. © C eng age Lear ning 2 01 4 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.

Chapter 5 Accounting for Merchandising Businesses