Solution manual fundamentals of accounting by cabrera chapter 11

Chapter 11
Accounting for Merchandising Activities
Exercises
Exercise 1
Exercise 2

Exercise 3

Exercise 4

Exercise 5
Exercise 6

Exercise 7

Exercise 8

Matching Type
1.
2.
3.
4.
5.
6.


7.
8.
9.
10.
11.

Test Material
Test Material 11-1
Requirement (1)
June 3
9
12
12
15
16
18
18
22
22
24
24

Inventory............................................
Accounts Payable.................

16,100

Accounts Payable (P16,100 x 0.40).
Inventory...............................

6,440

Cash...................................................
Sales Revenue.....................

9,200

Cost of Goods Sold...........................
Inventory...............................

5,500

Inventory (P51,000 – P1,000)...........
Accounts Payable.................

5,000

Inventory............................................
Cash......................................

2,600

Accounts Receivable.........................
Sales Revenue.....................

20,000

Cost of Goods Sold...........................
Inventory...............................

11,800

Sales Returns and Allowances.........
Accounts Receivable............

8,000

Inventory............................................
Cost of Goods Sold..............

4,800

Cash [P50,000 – 0.03 (P50,000)].....
Note Payable........................

48,500

Accounts Payable..............................
Inventory (P50,000 x 0.03)...
Cash (P50,000 x 0.97).........

50,000

16,100
6,440
9,200
5,500
5,000
2,600
20,000
11,800
8,000
4,800
48,500

1,500
48,500


June 28

29
30

Cash [(P20,000 – P8,000) x 0.98].....
Sales Discounts
[(P20,000 – P8,000 x 0.02)]...........
Accounts Receivable
(P20,000 – P8,000)...........

11,760
240
12,000

Accounts Payable (P16,100 – P6,440)
Cash......................................

9,660

Inventory (P9,000 – P350)................
Cash......................................

8,650

9,660

8,650

Requirement (2)
June

Bal.

3
15
16
22
39

Inventory
16,100 June 9
50,000
12
2,600
18
4,800
24
8,650
56,910

6,440
5,500
11,800
1,500

June 12

18
Bal.

Cost of Goods Sold
5,500 June 22
11,800
12,500

4,800

Requirement (3)
The decision to borrow funds was wise because the discount (P1,500) exceeded
the interest paid on the amount borrowed (P950). Thus the entity was P550
better off as a result of its decision.


Test Material 11-2
a. The operating cycle of a merchandising company consists of purchasing
merchandise, selling that merchandise to customers (often on account), and
collecting the sales proceeds from these customers. In the process, the
business converts cash into inventory, the inventory into accounts receivable,
and the accounts receivable into cash.
b. Journal entries assuming use of a perpetual inventory system:
GENERAL JOURNAL
Date
2009
Jan.
3

3

7

c.

Account Titles and Explanation
Cash

Sales
Sold tracking system
Palace Mountain Resort.

Cost of Goods Sold
Inventory
To
record
cost
merchandise sold.

Debit
200,000
to
112,000
of

Inventory
Accounts Payable (Hun Corp.)
Purchased
merchandise.
Terms 2/10, n/30; net cost,

P98,000 (P100,000 less 2%).

Credit
200,000

112,000

98,000

98,000

The debits and credits to the Inventory account should be posted to the
appropriate accounts in the inventory subsidiary ledger. The information
posted would be the costs and quantities of the types of merchandise
purchased or sold. The account payable to Hun also should be posted to the
Hun account in K-Star’s accounts payable ledger. No postings are required
to the accounts receivable ledger, as this was a cash sale. If K-Star
maintains more than one bank account, however, the debit to cash should be
posted to the proper account in the cash subsidiary ledger.

d. P426,000 (P440,000 beginning balance, less P112,000, plus, P98,000)


e. Journal entries assuming use of a periodic inventory system:
GENERAL JOURNAL
Date
2009
Jan.
3

7

f.

Account Titles and Explanation
Cash

Sales
Sold tracking system
Palace Mountain Resort.

Debit

Credit

200,000
to

Purchases
Accounts Payable (Hun Corp.)
Purchased
merchandise.
Terms 2/10, n/30; net cost,
P98,000 (P100,000 less 2%).

98,000

200,000

98,000

Computation of the cost of goods sold:
Inventory, January 1..................................................................
Add: Purchases........................................................................
Cost of goods available for sale................................................
Less: Inventory, January 7 (per part d)....................................
Cost of goods sold.....................................................................

P440,000
98,000
P538,000
426,000
P112,000

g. K-Star should use a perpetual inventory system. The items in its inventory
have a high per-unit cost. Therefore, management will want to know the
costs of the individual products included in specific sales transactions and
will want to keep track of the items in the stock. Although the company has a
manual accounting system, its volume of sales transactions is low enough
that maintaining a perpetual inventory record will not be difficult.
h. Gross profit

=
=
=

Sales revenue – Cost of goods sold
P200,000 – P112,000
P88,000

Gross profit margin

=
=
=

Gross profit  Sales revenue
P88,000  P200,000
44%