Quản trị Kinh doanh - Chapter 5: Accounting for merchandising operations

Accounting for Merchandising OperationsChapter 5PowerPoint Editor: Beth Kane, MBA, CPACopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 05-C1: Merchandising Activities 2 Service organizations sell time to earn revenue.Examples: Accounting firms, law firms, and plumbing servicesService CompaniesC 13ManufacturerWholesalerRetailerConsumersMerchandising CompaniesMerchandiserC 14C 1Reporting Income for a Merchandiser Merchandising companies sell products to earn revenue. Examples: sporting goods, clothing, and auto parts stores5 05-C2: Reporting Inventory for a Merchandiser 6Operating Cycle for a Merchandiser Begins with the purchase of merchandise and ends with the collection of cash from the sale of merchandise.C 27Inventory SystemsC 28Perpetual systemscontinually update accounting records for merchandising transactionsPeriodic systemsaccounting records relating to merchandise transactions are updated only at the end of the accounting periodC 2Inventory Systems9 05-P1: Accounting for Merchandise Purchases 10Merchandise Purchases On November 2, Z-Mart purchased $1,200 of merchandise inventory for cash.P111Trade DiscountsP112Purchase Discounts A deduction from the invoice price granted to induce early payment of the amount due.P1132/10, n/30Discount PercentNumber of Days Discount Is AvailableOtherwise, Net (or All) Is Due in 30 DaysCreditPeriodPurchase DiscountsP114 On November 2, Z-Mart purchased $1,200 of merchandise inventory on account, credit terms are 2/10, n/30.Purchase DiscountsP115 On November 12, Z-Mart paid the amount due on the purchase of November 2.Purchase DiscountsP116Purchase Discounts After we post these entries, the accounts involved look like these:P117Purchase Returns and AllowancesPurchase Return . . . Merchandise returned by the purchaser to the supplier.Purchase Allowance . . . A reduction in the cost of defective or unacceptable merchandise received by a purchaser from a supplier.P118 On November 15, Z-Mart (buyer) issues a $300 debit memorandum for an allowance from Trex for defective merchandise.Purchase Returns and AllowancesP119 Z-Mart purchases $1,000 of merchandise on June 1 with terms 2/10, n/60. Two days later, Z-Mart returns $100 of goods before paying the invoice. When Z-Mart later pays on June 11, it takes the 2% discount only on the $900 remaining balance.Purchase Returns and AllowancesP120Transportation Costs and Ownership TransferP121Transportation Costs Z-Mart purchased merchandise on terms of FOB shipping point. The transportation charge is $75.P122Accounting for MerchandiseP123NEED-TO-KNOWOct. 1Oct. 3Paid $30 cash for freight charges from UPS for the October 1 purchase.Oct. 7Returned 50 defective units from the October 1 purchase and received full credit.Oct. 11Paid the amount due from the October 1 purchase, less the return on October 7.Oct. 31Prepare journal entries to record each of the following purchases transactions of a merchandising company. Assume a perpetual inventory system.Purchased 125 units of a product at a cost of $4 per unit. Terms of the sale are 2/10, n/30, and FOB shipping point; the invoice is dated October 1.Assume the October 11 payment was never made and, instead, payment of the amount due on the October 1 purchase, less the return on October 7, occurred on October 31.P1P124NEED-TO-KNOWOct. 1Oct. 3Paid $30 cash for freight charges from UPS for the October 1 purchase.Oct. 7Returned 50 defective units from the October 1 purchase and received full credit.Oct. 11Paid the amount due from the October 1 purchase, less the return on October 7.Purchased 125 units of a product at a cost of $4 per unit. Terms of the sale are 2/10, n/30, and FOB shipping point; the invoice is dated October 1.Oct. 1500Oct. 1500Oct. 330Oct. 7200Oct. 7200Oct. 11300Oct. 116Oct. 31324DateDebitCreditOct. 1Merchandise inventory (125 units @ $4)500Accounts payable500Oct. 3Merchandise inventory30Cash30Oct. 7Accounts payable (50 units @ $4)200Merchandise inventory (50 units @ $4)200Oct. 11Accounts payable300Merchandise inventory ($300 x .02)6Cash294General JournalMerchandise inventoryAccounts payableP125NEED-TO-KNOWOct. 1Oct. 3Paid $30 cash for freight charges from UPS for the October 1 purchase.Oct. 7Returned 50 defective units from the October 1 purchase and received full credit.Purchased 125 units of a product at a cost of $4 per unit. Terms of the sale are 2/10, n/30, and FOB shipping point; the invoice is dated October 1.Oct. 31Assume the October 11 payment was never made and, instead, payment of the amount due on the October 1 purchase, less the return on October 7, occurred on October 31.Oct. 1500Oct. 1500Oct. 330Oct. 7200Oct. 7200Oct. 31300Oct. 31330DateDebitCreditOct. 1Merchandise inventory (125 units @ $4)500Accounts payable500Oct. 3Merchandise inventory30Cash30Oct. 7Accounts payable200Merchandise inventory (50 units @ $4)200Oct. 31Accounts payable300Cash300General JournalMerchandise inventoryAccounts payableP126 05-P2: Accounting for Merchandise Sales 27Accounting for Merchandise SalesP228Sales of Merchandise P2Each sales transaction for a seller of merchandise involves two parts:Revenue received in the form of an asset from a customer.Recognition of the cost of merchandise sold to a customer.29 Z-Mart sold $2,400 of merchandise on credit. The merchandise has a cost basis to Z-Mart of $1,600. Sales of Merchandise P230Sales DiscountsP2Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts. 31Z-Mart completes a $1,000 credit sale with terms of 2/10, n/60.Sales DiscountsP2The account was paid in full within the 60-day period.The account was paid in full within the 10-day discount period.32Sales Returns and AllowancesP2Sales returns and allowances usually involve dissatisfied customers and the possibility of lost future sales.Sales returns refer to merchandise that customers return to the seller after a sale. Sales allowances refer to reductions in the selling price of merchandise sold to customers. 33 Recall Z-Mart’s sale for $2,400 that had a cost of $1,600. Assume the customer returns part of the merchandise. The returned items sell for $800 and cost $600.Sales Returns and AllowancesP234 Assume that $800 of the merchandise Z-Mart sold on November 3 is defective but the buyer decides to keep it because Z-Mart offers a $100 price reduction. Sales AllowancesP235NEED-TO-KNOWJun. 1Jun. 7Jun. 8Jun. 11The customer returns 20 units because those units did not fit the customer’s needs. The seller restores those units to its inventory.The customer discovers that 30 units are damaged but are still of some use and, therefore, keeps the units because the seller sends the buyer a credit memorandum for $90 to compensate for the damage.Prepare journal entries to record each of the following sales transactions of a merchandising company. Assume a perpetual inventory system.Sold 500 units of merchandise to a customer for $14 per unit under credit terms of 2/10, n/30, FOB shipping point, and the invoice is dated June 1. The merchandise had cost $10 per unit.The customer discovers that 10 units are the wrong color, but keeps 8 of these units because the seller sends a $12 credit memorandum to compensate.The customer returns the remaining 2 units to the seller. The seller restores the 2 returned units to its inventoryP236NEED-TO-KNOWJun. 1Jun. 7DateDebitCreditJun. 1Accounts receivable7,000Sales (500 @ $14)7,000Jun. 1Cost of goods sold (500 @ $10)5,000Merchandise inventory5,000Jun. 7Sales returns and allowances (20 @ $14)280Accounts receivable280Jun. 7Merchandise inventory (20 @ $10)200Cost of goods sold 200General JournalThe customer returns 20 units because those units did not fit the customer’s needs. The seller restores those units to its inventory.Sold 500 units of merchandise to a customer for $14 per unit under credit terms of 2/10, n/30, FOB shipping point, and the invoice is dated June 1. The merchandise had cost $10 per unit.P237NEED-TO-KNOWJun. 8Jun. 11The customer discovers that 30 units are damaged but are still of some use and, therefore, keeps the units because the seller sends the buyer a credit memorandum for $90 to compensate for the damage.The customer discovers that 10 units are the wrong color, but keeps 8 of these units because the seller sends a $12 credit memorandum to compensate.The customer returns the remaining 2 units to the seller. The seller restores the 2 returned units to its inventoryDateDebitCreditJun. 1Accounts receivable7,000Sales (500 @ $14)7,000Jun. 01Cost of goods sold (500 @ $10)5,000Merchandise inventory5,000Jun. 07Sales returns and allowances (20 @ $14)280Accounts receivable280Jun. 07Merchandise inventory (20 @ $10)200Cost of goods sold 200Jun. 08Sales returns and allowances 90Accounts receivable90Jun. 1140Accounts receivable40Jun. 11Merchandise inventory (2 @ $10)20Cost of goods sold20General JournalSales returns and allowances ($12 + (2 @ $14))P238NEED-TO-KNOWDateDebitCreditJun. 1Accounts receivable7,000Sales (500 @ $14)7,000Jun. 01Cost of goods sold (500 @ $10)5,000Merchandise inventory5,000Jun. 07Sales returns and allowances (20 @ $14)280Accounts receivable280Jun. 07Merchandise inventory (20 @ $10)200Cost of goods sold 200Jun. 08Sales returns and allowances 90Accounts receivable90Jun. 1140Accounts receivable40Jun. 11Merchandise inventory (2 @ $10)20Cost of goods sold20General JournalSales$7,000Sales returns and allowances$410Sales discounts0(410)Net sales6,590Cost of goods sold4,780Gross profit on sales$1,810Partial income statementSales returns and allowances ($12 + (2 @ $14))P239 05-P3: Adjusting Entries for Merchandisers 40Merchandising Cost Flow in the Accounting CycleP241Adjusting Entries for MerchandisersP3A merchandiser using a perpetual inventory system is usually required to make an adjustment to update the Merchandise Inventory account to reflect any loss of merchandise, including theft and deterioration.42Closing Entries for MerchandisersP343NEED-TO-KNOWMerchandise inventory$756Sales returns and allowances$130Z. Zee, Capital2,306Cost of goods sold2,100Z. Zee, Withdrawals140Depreciation expense206Sales3,204Salaries expense650Sales discounts94Other operating expenses100DebitCreditMerchandise inventory$756Z. Zee, Capital$2,306Z. Zee, Withdrawals140Sales3,204Sales discounts94Sales returns and allowances130Cost of goods sold2,100Depreciation expense206Salaries expense650Other operating expenses100A merchandising company’s ledger on May 31, its fiscal year-end, includes the following selected accounts that have normal balances (it uses the perpetual inventory system). A physical count of its May 31 year-end inventory reveals that the cost of the merchandise inventory still available is $718. (a) Prepare the entry to record any inventory shrinkage. (b) Prepare journal entries to close the balances in temporary revenue and expense accounts.P344NEED-TO-KNOWDebitCreditMerchandise inventory$756Z. Zee, Capital$2,306Z. Zee, Withdrawals140Sales3,204Sales discounts94Sales returns and allowances130Cost of goods sold2,100Depreciation expense206Salaries expense650Other operating expenses100A merchandising company’s ledger on May 31, its fiscal year-end, includes the following selected accounts that have normal balances (it uses the perpetual inventory system). A physical count of its May 31 year-end inventory reveals that the cost of the merchandise inventory still available is $718. (a) Prepare the entry to record any inventory shrinkage. (b) Prepare journal entries to close the balances in temporary revenue and expense accounts.DateDebitCreditMay 31Cost of Goods Sold38Merchandise inventory ($756 - $718)38General Journal$7182,138P345NEED-TO-KNOWDebitCreditMerchandise inventory$756Z. Zee, Capital$2,306Z. Zee, Withdrawals140Sales3,204Sales discounts94Sales returns and allowances130Cost of goods sold2,100Depreciation expense206Salaries expense650Other operating expenses100$7182,138DateDebitCreditMay 31Sales3,204Income Summary3,204May 31Income Summary3,318Sales discounts94Sales returns and allowances130Cost of Goods Sold ($2,100 + $38)2,138Depreciation expense206Salaries expense650Other operating expenses100General JournalP346 05-P4: Financial Statement Formats 47P448Single-Step Income StatementP449Classified Balance SheetHighlyLiquidLessLiquidP450NEED-TO-KNOWAssume Target’s adjusted trial balance on April 30, 20X1, its fiscal year-end, follows. (a) Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses. (b) Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.DebitCreditMerchandise inventory$820Other (noninventory) assets2,608Total liabilities$500Target, Capital2,091Target, Withdrawals160Sales4,512Sales discounts45Sales returns and allowances240Cost of goods sold1,490Sales salaries expense640Rent expense - Selling space160Store supplies expense30Advertising expense260Office salaries expense570Rent expense - Office space72Office supplies expense8Totals$7,103$7,103P451NEED-TO-KNOWDebitCreditMerchandise inventory$820Other (noninventory) assets2,608Total liabilities$500Target, Capital2,091Target, Withdrawals160Sales4,512Sales discounts45Sales returns and allowances240Cost of goods sold1,490Sales salaries expense640Rent expense - Selling space160Store supplies expense30Advertising expense260Office salaries expense570Rent expense - Office space72Office supplies expense8Totals$7,103$7,103Sales$4,512Less: Sales discounts$45 Sales returns and allowances240285Net sales4,227Cost of goods sold1,490Gross profit2,737ExpensesSelling expensesSales salaries expense640Rent expense - Selling space160Store supplies expense30Advertising expense260Total selling expenses1,090General and administrative expensesOffice salaries expense570Rent expense - Office space72Office supplies expense8Total general and administrative expenses650Total expenses1,740Net income $997TARGETFor Year Ended April 30, 20X1Income StatementP452NEED-TO-KNOWSales$4,512Net sales$4,227Less: Sales discounts$45Expenses Sales returns and allowances240285Cost of goods sold1,490Net sales4,227Selling expenses1,090Cost of goods sold1,490General and administrative expenses650Gross profit2,737Total expenses3,230ExpensesNet income$997Selling expensesSales salaries expense640Rent expense - Selling space160Store supplies expense30Advertising expense260Total selling expenses1,090General and administrative expensesOffice salaries expense570Rent expense - Office space72Office supplies expense8Total general and administrative expenses650Total expenses1,740Net income $997TARGETFor Year Ended April 30, 20X1Income StatementTARGETIncome StatementFor Year Ended April 30, 20X1P453Global ViewAccounting for Merchandise Purchases and SalesBoth U.S. GAAP and IFRS include broad and similar guidance for the accounting of merchandise purchases and sales. Income Statement PresentationOrder of expensesSeparate disclosuresPresentation of expensesOperating IncomeAlternative income54 05-A1: Acid-Test Ratios 55A common rule of thumb is the acid-test ratio should have a value of at least 1.0 to conclude a company is unlikely to face liquidity problems in the near future.= Quick assets Current liabilitiesAcid-testratioAcid-testratio= Cash + S-t investments + Receivables Current liabilitiesAcid-Test RatioA156 05-A2: Gross Margin Ratios 57Percentage of dollar sales available to cover expenses and provide a profit.Grossmarginratio Net sales - Cost of goods sold Net sales=Gross Margin RatioA258JCPenneyA1/A259 05-P5: Periodic & Perpetual Inventory Systems 60Appendix 5A: Periodic Inventory SystemP5A periodic inventory system requires updating the inventory account only at the end of a period to reflect the quantity and cost of both the goods available and the goods sold.(a)(b)(c)(d)(e)(f)(g)61Appendix 5A: Periodic Inventory SystemP562Appendix 5B: Work Sheet—Perpetual SystemP563End of Chapter 564