2. 11 Inventory 400
Cash 400
12 Accounts Payable 300
Inventory 300
19 Accounts Payable ($7,600 – $300) 7,300
Inventory
($7,300 X 2%) 146
Cash ($7,300 – $146) 7,154
(b) June 10 Accounts Receivable 7,600
Sales Revenue 7,600
Cost of Goods Sold 4,300
Inventory 4,300
12 Sales Returns and Allowances 300
Accounts Receivable 300
Inventory 70
Cost of Goods Sold 70
19 Cash ($7,300 – $146) 7,154
Sales Discounts ($7,300 X 2%) 146
Accounts Receivable
3. ($7,600 – $300) 7,300
EXERCISE 5-8
(a) Cost of Goods Sold 600
Inventory 600
(b) Sales Revenue 378,000
Income Summary 378,000
Income Summary 327,600
Cost of Goods Sold ($208,000 + $600) 208,600
Freight-Out 7,000
Insurance Expense 12,000
Rent Expense 20,000
Salaries and Wages Expense 59,000
Sales Discounts 8,000
Sales Returns and Allowances 13,000
Income Summary ($378,000 – $327,600) 50,400
Retained Earnings 50,400
EXERCISE 5-13
(a) (*missing amount)
a. Sales revenue $ 90,000)
*Sales returns (9,000)
4. Net sales $ 81,000)
b. Net sales $ 81,000)
Cost of goods sold (56,000)
*Gross profit $ 25,000)
c. Gross profit $ 25,000)
Operating expenses (12,000)
*Net income $ 13,000)
d. *Sales revenue $103,000)
Sales returns (5,000)
Net sales $98,000)
e. Net sales $98,000)
*Cost of goods sold 60,500)
Gross profit $ 37,500)
f. Gross profit $ 37,500)
*Operating expenses 22,500)
Net income $ 15,000)
)
(b) Lee Company
Gross profit ÷ Net sales = $25,000 ÷ $81,000 = 30.9%
5. Chan Company
Gross profit ÷ Net sales = $37,500 ÷ $98,000 = 38.3%
PROBLEM 5-3A
(a) STARZ DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2014
Sales revenues
Sales revenue $724,000
Less: Sales returns and
allowances 8,000
Net sales 716,000
Cost of goods sold 412,700
Gross profit 303,300
Operating expenses
Salaries and wages expense $108,000
Depreciation expense 23,700
Sales commissions expense 14,500
Utilities expense 12,000
Insurance expense 7,200
Property tax expense 4,800
6. Total operating expenses 170,200
Income from operations 133,100
Other revenues and gains
Interest revenue 4,000
Other expenses and losses
Interest expense 8,600 4,600
Net income $ 128,500
STARZ DEPARTMENT STORE
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained Earnings, January 1 $64,600
Add: Net income 128,500
193,100
Less: Dividends 24,000
Retained Earnings, December 31 $169,100
STARZ DEPARTMENT STORE
Balance Sheet
December 31, 2014
Assets
7. Current assets
Cash $ 23,800
Accounts receivable 50,300
Inventory 75,000
Prepaid insurance 2,400
Total current assets $151,500
Property, plant, and equipment
Buildings $290,000
Less: Accumulated depreciation—
buildings 52,500 237,500
Equipment 110,000
Less: Accumulated depreciation—
equipment 42,900 67,100 304,600
Total assets $456,100
STARZ DEPARTMENT STORE
Balance Sheet (Continued)
December 31, 2014
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 80,300
8. Mortgage payable (due next year) 16,000
Interest payable 5,600
Property taxes payable 4,800
Sales commissions payable 4,300
Total current liabilities $111,000
Long-term liabilities
Mortgage payable 64,000
Total liabilities 175,000
Stockholders’ equity
Common stock 112,000
Retained earnings 169,100
Total stockholders’ equity 281,100
Total liabilities and stockholders’ equity $456,100
(b) Dec. 31 Depreciation Expense 23,700
Accumulated Depreciation—
Buildings 10,400
Accumulated Depr
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