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Page 1: ch05

Chapter 5-1

Page 2: ch05

Chapter 5-2

Merchandising OperationsMerchandising Operationsand the Multiple-Stepand the Multiple-Step

Income StatementIncome Statement

Financial Accounting, Fifth Edition

Page 3: ch05

Chapter 5-3

1. Identify the differences between a service company and a merchandising company.

2. Explain the recording of purchases under a perpetual inventory system.

3. Explain the recording of sales revenues under a perpetual inventory system.

4. Distinguish between a single-step and a multiple-step income statement.

5. Determine cost of goods sold under a periodic system. 6. Explain the factors affecting profitability. 7. Identify a quality of earnings indicator.

Study ObjectivesStudy Objectives

Page 4: ch05

Chapter 5-4

Merchandising Merchandising OperationsOperations

Recording Recording Purchases of Purchases of MerchandiseMerchandise

Recording Recording Sales of Sales of

MerchandiseMerchandise

Income Income Statement Statement

PresentationPresentation

Evaluating Evaluating ProfitabilityProfitability

Merchandising OperationsMerchandising Operations

Operating Operating cyclescyclesFlow of costs- Flow of costs- perpetual and perpetual and periodic periodic inventory inventory systems.systems.

Freight costsFreight costsPurchase Purchase returns and returns and allowancesallowancesPurchase Purchase discountsdiscountsSummary of Summary of purchasing purchasing transactionstransactions

Sales returns Sales returns and allowancesand allowancesSales discountsSales discounts

Sales revenuesSales revenuesGross profitGross profitOperating expensesOperating expensesNonoperating Nonoperating activitiesactivitiesDetermining cost of Determining cost of goods sold-periodic goods sold-periodic systemsystem

Gross profit rateGross profit rateProfit margin Profit margin ratioratio

Page 5: ch05

Chapter 5-5

Merchandising OperationsMerchandising Operations

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Merchandising CompaniesBuy and Sell Goods

Wholesaler Retailer Consumer

The primary source of revenues is referred to as sales revenue or sales.

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Chapter 5-6

Merchandising OperationsMerchandising Operations

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Income Measurement

Cost of goods sold is the total cost of merchandise

sold during the period.

Not used in a Service business.

Net Income (Loss)

Less

LessEquals

Equals

SalesRevenue

Cost of Goods Sold

Gross Profit

Operating Expenses

Illustration 5-1 Income measurement process for a merchandising company

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Chapter 5-7

The operating cycle of a merchandising company ordinarily is longer than that of a service company.

Illustration 5-2

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Operating Cycles

Merchandising OperationsMerchandising Operations

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Chapter 5-8

Flow of Costs

Companies use either a perpetual inventory system or a periodic inventory system to account for inventory.

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Merchandising OperationsMerchandising Operations

Illustration 5-3

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Chapter 5-9

Perpetual System

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Merchandising OperationsMerchandising Operations

Flow of Costs

Maintain detailed records of the cost of each inventory purchase and sale.

Records continuously show inventory that should be on hand.

Company determines cost of goods sold each time a sale occurs.

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Chapter 5-10

Periodic System Do not keep detailed records of the goods on hand. Determine cost of goods sold only at end of accounting

period. Physical inventory count to determine cost of goods on

hand. Calculation of Cost of Goods Sold:

Beginning inventory

$ 100,000Add: Purchases, net

800,000Goods available for sale

900,000Less: Ending inventory

125,000Cost of goods sold

$ 775,000

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Merchandising OperationsMerchandising Operations

Flow of Costs

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Chapter 5-11

Additional ConsiderationPerpetual System:

Traditionally used for merchandise with high unit values.

Provides better control over inventories. Requires additional clerical work and additional cost

to maintain inventory records.

SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.

Merchandising OperationsMerchandising Operations

Flow of Costs

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Chapter 5-12

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Chapter 5-13

Made using cash or credit (on account).Normally recorded when goods are received.Purchase invoice should support each credit purchase.

Recording Purchases of MerchandiseRecording Purchases of Merchandise

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

Illustration 5-5

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Chapter 5-14

Illustration: Illustration: Sauk Stereo (the buyer) uses as a purchase invoice the sales invoice prepared by PW Audio Supply, Inc. (the seller). Prepare the journal entry for Sauk Stereo for the invoice from PW Audio Supply.

Merchandise inventory 3,800May 4Accounts payable

3,800SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory

system.system.

Recording Purchases of MerchandiseRecording Purchases of MerchandiseIllustration 5-5

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Chapter 5-15

Illustration 5-6

Seller places goods Free On Board the carrier, and buyer pays freight costs.

Seller places goods Free On Board to the buyer’s place of business, and

seller pays freight costs.

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Freight Costs – Terms of Sale

Freight costs incurred by the seller are an operating expense.

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Chapter 5-16

Illustration: Assume upon delivery of the goods on May 6, Sauk Stereo pays Haul-It Freight Company $150 for freight charges, the entry on Sauk Stereo’s books is:

Merchandise inventory 150May 6Cash

150

Recording Purchases of MerchandiseRecording Purchases of Merchandise

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

Assume the freight terms on the invoice in Illustration 5-5 had required PW Audio Supply to pay the freight charges, the entry by PW Audio Supply would have been:

Freight-out 150May 4Cash

150

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Chapter 5-17

Purchaser may be dissatisfied because goods are damaged or defective, of inferior quality, or do not meet specifications.

Purchase Returns and Allowances

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Return goods for credit if the sale was made on

credit, or for a cash refund if the purchase

was for cash.

May choose to keep the merchandise if the seller will grant an

allowance (deduction) from the purchase

price.

Purchase Return Purchase Allowance

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-18

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:

a. Purchases b. Purchase Returns c. Purchase Allowance d. Merchandise Inventory

Question

Recording Purchases of MerchandiseRecording Purchases of Merchandise

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-19

Recording Purchases of MerchandiseRecording Purchases of Merchandise

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

Illustration: Assume that on May 8 Sauk Stereo returned to PW Audio Supply goods costing $300.

Accounts payable 300May 8Merchandise inventory 300

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Chapter 5-20

Credit terms may permit buyer to claim a cash discount for prompt payment.Advantages:

Purchaser saves money.Seller shortens the operating cycle.

Purchase Discounts

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Example: Credit terms of 2/10, n/30, is read “two-ten, net thirty.” 2% cash discount if payment is made within 10 days. Otherwise, net amount due within 30 days.

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-21

Purchase Discounts - Terms

Recording Purchases of MerchandiseRecording Purchases of Merchandise

2% discount if paid within 10

days, otherwise net amount due

within 30 days.

1% discount if paid within

first 10 days of next month.

2/10, n/30 1/10 EOM

Net amount due within the first 10 days of the next

month.

n/10 EOM

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-22

Accounts payable 3,500May 14

Cash 3,430

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Merchandise Inventory 70

(Discount = $3,500 x 2% = $70)

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

Illustration: Assume Sauk Stereo pays the balance due of $3,500 (gross invoice price of $3,800 less purchase returns and allowances of $300) on May 14, the last day of the discount period. Prepare the journal entry Sauk makes to record its May 14 payment.

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Chapter 5-23

Accounts payable 3,500June 3

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Cash 3,500

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

Illustration: If Sauk Stereo failed to take the discount, and instead made full payment of $3,500 on June 3, the journal entry would be:

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Chapter 5-24

Should discounts be taken when offered?Purchase Discounts

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Discount of 2% on $3,500 70.00$ $3,500 invested at 10% f or 20 days 19.18 Savings by taking the discount 50.82$

Example: 2% for 20 days = Annual rate of 36.5% (365/20 = 18.25 twenty-day periods x 2% = 36.5%)

Passing up the discount offered equates to paying an interest rate of 2% on the use of $3,500 for 20 days.

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-25

Merchandise I nventoryDebit Credit

$3,500 8th - Return$300

Balance

4th - Purchase

$3,280$3,280

70 14th - Discount

Recording Purchases of MerchandiseRecording Purchases of Merchandise

Summary of Purchasing Transactions

1506th – Freight-in

IllustrationIllustration

SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.

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Chapter 5-26

Made for cash or credit (on account).Normally recorded when earned, usually when goods transfer from seller to buyer.Sales invoice should support each credit sale.

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

Illustration 5-5

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Chapter 5-27

Two Journal Entries to Record a SaleTwo Journal Entries to Record a Sale

Cash or Accounts receivable XXXSales XXX

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

#1

Cost of goods sold XXXMerchandise inventory XXX

#2

Selling

Price

Cost

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Chapter 5-28

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

Accounts receivable 3,800May 4Sales

3,800

Illustration: Assume PW Audio Supply records its May 4 sale of $3,800 to Sauk Stereo on account (Illustration 5-5) as follows. Assume the merchandise cost PW Audio Supply $2,400.

Cost of goods sold 2,4004Merchandise inventory

2,400

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Chapter 5-29

“Flipside” of purchase returns and allowances.Contra-revenue account (debit).Sales not reduced (debited) because: would obscure importance of sales returns

and allowances as a percentage of sales. could distort comparisons between total

sales in different accounting periods.

Sales Returns and Allowances

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

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Chapter 5-30

Illustration: Prepare the entry PW Audio Supply would make to record the credit for returned goods that had a $300 selling price (assume a $140 cost). Assume the goods were not defective.

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

Sales returns and allowances 300May 8Accounts receivable

300Merchandise inventory 1408

Cost of goods sold140

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Chapter 5-31

Illustration: Assume the returned goods were defective and had a scrap value of $50, PW Audio would make the following entries:

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

Sales returns and allowances 300May 8Accounts receivable

300Merchandise inventory 508

Cost of goods sold50

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Chapter 5-32

The cost of goods sold is determined and recorded each time a sale occurs in:

a. periodic inventory system only. b. a perpetual inventory system only. c. both a periodic and perpetual inventory

system. d. neither a periodic nor perpetual inventory

system.

Review Question

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

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Chapter 5-33

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Chapter 5-34

Offered to customers to promote prompt payment.“Flipside” of purchase discount.Contra-revenue account (debit).

Sales Discount

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

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Chapter 5-35

Recording Sales of MerchandiseRecording Sales of Merchandise

SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.

Cash 3,430May 14

Accounts receivable3,500

Sales discounts 70

* [($3,800 – $300) X 2%]

*

Illustration: Assume Sauk Stereo pays the balance due of $3,500 (gross invoice price of $3,800 less purchase returns and allowances of $300) on May 14, the last day of the discount period. Prepare the journal entry PW Audio Supply makes to record the receipt on May 14.

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Chapter 5-36

Subtract total expenses from total revenuesTwo reasons for using the single-step format: 1) Company does not realize any type of

profit until total revenues exceed total expenses.

2) Format is simpler and easier to read.

Single-Step Income Statement

Income Statement PresentationIncome Statement Presentation

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

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Chapter 5-37

Illustration 5-7

Single-Step

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Income Statement PresentationIncome Statement Presentation

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Chapter 5-38

Considered more useful because it highlights the components of net income. Three important line items: gross profit, income from operations, and net income.

Multiple-Step Income Statement

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Income Statement PresentationIncome Statement Presentation

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Chapter 5-39

Key Line Key Line ItemsItems

Multiple-Step

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Illustration 5-8

Income Statement PresentationIncome Statement Presentation

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Chapter 5-40

The multiple-step income statement for a merchandiser shows each of the following features except:

a. gross profit. b. cost of goods sold. c. a sales revenue section.d. investing activities section.

Review Question

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Income Statement PresentationIncome Statement Presentation

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Chapter 5-41

Sales Revenues

Income Statement PresentationIncome Statement Presentation

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Illustration 5-9

Page 42: ch05

Chapter 5-42

Income Statement PresentationIncome Statement Presentation

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Illustration 5-11

Comparisons with past amounts and rates and with those in the industry indicate the effectiveness of a company’s purchasing and pricing policies.

Gross Profit

Page 43: ch05

Chapter 5-43

Income Statement PresentationIncome Statement Presentation

Illustration 5-11Operating Expenses

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Chapter 5-44

Income Statement PresentationIncome Statement Presentation

SO 4 Distinguish between a single-step and a multiple-step income SO 4 Distinguish between a single-step and a multiple-step income statement.statement.

Illustration 5-10

Nonoperating ActivitiesVarious revenues and expenses and gains and losses that are unrelated to the company’s main line of operations.

Page 45: ch05

Chapter 5-45

Income Income Statement Statement PresentationPresentation

Illustration 5-11

Page 46: ch05

Chapter 5-46

Page 47: ch05

Chapter 5-47

No running account of changes in inventory.Ending inventory determined by physical count.Directly adjust Merchandise Inventory account for any transaction that affects inventory.

SO 5 Determine cost of goods sold under a periodic SO 5 Determine cost of goods sold under a periodic system.system.

Determining Cost of Goods Sold Under a Periodic System

Income Statement PresentationIncome Statement Presentation

Page 48: ch05

Chapter 5-48 SO 5 Determine cost of goods sold under a periodic SO 5 Determine cost of goods sold under a periodic

system.system.

Determining Cost of Goods Sold Under a Periodic System

Income Statement PresentationIncome Statement Presentation

Illustration 5-13 Cost of goods sold for amerchandiser using aperiodic inventory system

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Chapter 5-49

Evaluating ProfitabilityEvaluating Profitability

A company’s gross profit may be expressed as a percentage by dividing the amount of gross profit by net sales.

SO 6 Explain the factors affecting profitability.SO 6 Explain the factors affecting profitability.

Gross Profit Rate

A decline in the gross profit rate might have several causes.

The company may have begun to sell products with a lower “markup.”

Increased competition may result in a lower selling price.

Company may be forced to pay higher prices to its suppliers without being able to pass these costs on to its customers.

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Chapter 5-50

Evaluating ProfitabilityEvaluating Profitability

SO 6 Explain the factors affecting profitability.SO 6 Explain the factors affecting profitability.

Gross Profit RateIllustration 5-15

Why does Wal-Mart have a lower gross profit rate than Target and the industry average?

Page 51: ch05

Chapter 5-51

Evaluating ProfitabilityEvaluating Profitability

Measures the percentage of each dollar of sales that results in net income.

SO 6 Explain the factors affecting profitability.SO 6 Explain the factors affecting profitability.

Profit Margin Ratio

How do the gross profit rate and profit margin ratio differ?

Gross profit rate - measures the margin by which selling price exceeds cost of goods sold.

Profit margin ratio - measures the extent by which selling price covers all expenses (including cost of goods sold).

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Chapter 5-52

Evaluating ProfitabilityEvaluating Profitability

SO 6 Explain the factors affecting profitability.SO 6 Explain the factors affecting profitability.

Illustration 5-17Profit Margin Ratio

How does Wal-Mart compare to its competitors? Keep in mind that an increasing percentage of Wal-Mart’s sales is from low-margin groceries.

Page 53: ch05

Chapter 5-53

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Chapter 5-54

Evaluating ProfitabilityEvaluating Profitability

Earnings have high quality if they provide a full and transparent depiction of how a company performed.

SO 7 Identify a quality of earnings indicator.SO 7 Identify a quality of earnings indicator.

In general, a measure significantly less than 1 suggests that a company may be using more aggressive accounting techniques in order to accelerate income recognition.

A measure significantly greater than 1 suggests that a company is using conservative accounting techniques which cause it to delay the recognition of income.

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Chapter 5-55

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Record revenues when sales are made. Do not record cost of merchandise sold on the date of

sale. Physical inventory count at the end of the period to

determine: 1. cost of merchandise on hand and 2. cost of goods sold during the period.

Record purchases of merchandise in Purchases account.

Purchase returns and allowances, Purchase discounts, and Freight costs are recorded in separate accounts.

Periodic Inventory SystemPeriodic Inventory System

Recording Merchandise Transactions

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Chapter 5-56

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Illustration:Illustration: On the basis of the sales invoice (Illustration 5-5) and receipt of the merchandise ordered from PW Audio Supply, Sauk Stereo records the $3,800 purchase as follows.

Purchases 3,800May 4Accounts payable

3,800

Periodic Inventory SystemPeriodic Inventory System

Recording Purchases of Merchandise

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Chapter 5-57

Illustration:Illustration: If Sauk pays Haul-It Freight Company $150for freight charges on its purchase from PW Audio Supply on May 6, the entry on Sauk’s books is:

Freight-in (Transportation-in) 150May 6Cash

150

Freight Costs

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

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Chapter 5-58

Illustration:Illustration: Sauk Stereo returns $300 of goods to PW Audio Supply and prepares the following entry to recognize the return.

Accounts payable 300May 8Purchase returns and allowances 300

Purchase Returns and Allowances

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

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Chapter 5-59

Illustration:Illustration: On May 14 Sauk Stereo pays the balance due on account to PW Audio Supply, taking the 2% cash discount allowed by PW Audio for payment within 10 days. SaukStereo records the payment and discount as follows.

Accounts payable 3,500May 14Purchase discounts

70

Purchase Discounts

Cash 3,430

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

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Chapter 5-60

No entry is recorded for cost of goods sold at the time of the sale under a periodic system.

Illustration:Illustration: PW Audio Supply, records the sale of $3,800 of merchandise to Sauk Stereo on May 4 (sales invoice No. 731, Illustration 5-5) as follows.

Accounts receivable 3,800May 4Sales

3,800

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

Recording Sales of Merchandise

Page 61: ch05

Chapter 5-61

Illustration:Illustration: To record the returned goods received from Sauk Stereo on May 8, PW Audio Supply records the $300 sales return as follows.

Sales returns and allowances 300May 4Accounts receivable

300

Sales Returns and Allowances

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

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Chapter 5-62

Illustration:Illustration: On May 14, PW Audio Supply receives payment of $3,430 on account from Sauk Stereo. PW Audio honors the 2% cash discount and records the payment of Sauk’s account receivable in full as follows.

Sales Discounts

Cash 3,430May 14

Accounts receivable3,500

Sales discounts 70

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Periodic Inventory SystemPeriodic Inventory System

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Chapter 5-63

Comparison of Entries—Perpetual Vs. PeriodicComparison of Entries—Perpetual Vs. Periodic

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Page 64: ch05

Chapter 5-64

SO 8 Explain the recording of purchases and SO 8 Explain the recording of purchases and sales of sales of inventory under a periodic inventory under a periodic inventory system.inventory system.

Comparison of Entries—Perpetual Vs. PeriodicComparison of Entries—Perpetual Vs. Periodic

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Chapter 5-65

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