ACC 100 Accounting I Week 5 Discussion 1

  

“Merchandising Operations” Please respond to the following:Use the Internet to research the annual report for at least two (2) merchandising companies. Identify the method that is used to track inventory. Next, watch A. Mursau’s video:Identify the inventory tracking method that is used to record the cost of goods sold and ending inventory. Suggest the key risks inherent in recording inventory in using both methods. Provide a rationale for your response.
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Accounting I
ACC 100
Accounting for Merchandising
Operations
Topics
• Merchandising operations
• Recording purchases of merchandise
• Recording sales of merchandise
• Completing the accounting cycle
• Forms of financial statements
Merchandising Operations
Buys and sells goods to earn a profit
Merchandiser – wholesaler or retailer
Primary source of revenue is sales
Operating Cycles
Receive
cash
Accounts
receivable
Purchase
products
Sell
inventory
Flow Of Costs
Beginning Inventory
Cost of Goods
Purchased
Cost of Goods Available
for Sale
Cost of Goods Sold
Ending Inventory
Inventory Systems
Perpetual
System
Periodic
System
• Inventory records are
updated with every
purchase and every sale
• Provides better control
over inventories
• Inventory records are
updated only at the end
of the period when a
physical count is taken
PROPERTIES
On passing, ‘Finish’ button:
On failing, ‘Finish’ button:
Allow user to leave quiz:
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User may attempt quiz:
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Recording Purchases Of Merchandise
Crazy about Computers purchases merchandise on March 2, 2012. The invoice
provides the detail of the transaction as shown below.
Invoice Number 322012
Date – March 2, 2012
Crazy about Computers
30 Computer Court
Sioux Falls, SD 66330
Great Geeks Electronics
12 Main Street
Many, MN 55343
P O Date 3/1/2012 Terms 2/10, n/30 Freight FOB Destination FedEx
Model No.
GG334
Description
Longitude
Quantity
4
Total
Price
$300
Amount
$1,200
$1,200
Recording Purchases Of Merchandise
Crazy about Computers records the purchase of merchandise for $1,200 on
March 2, 2012.
Perpetual System
3/2/2012
Merchandise Inventory $1,200
Accounts Payable
$1,200
Purchased merchandise on account, 2/10, n/30…
Recording Purchases Of Merchandise
Crazy about Computers records the purchase of merchandise for $1,200 on
March 2, 2012.
Periodic System
3/2/2012
Purchases
$1,200
Accounts Payable
$1,200
Purchased merchandise on credit 2/10, n/30..
Purchase Discounts
Crazy about Computers purchases merchandise on March 2, 2012. The invoice
provides the detail of the transaction as shown below.
Invoice Number 322012
Date – March 2, 2012
Crazy about Computers
30 Computer Court
Sioux Falls, SD 66330
Great Geeks Electronics
12 Main Street
Many, MN 55343
P O Date 3/1/2012 Terms 2/10, n/30 Freight FOB Destination FedEx
Model No.
GG334
Description
Longitude
Quantity
4
Total
Price
$300
Amount
$1,200
$1,200
Purchase Discounts- Perpetual System
Crazy about Computers records the payment of merchandise for $1,200 on
March 2, 2012. Crazy about Computers pays the invoice on March 12, 2012 and
is able to take the discount.
Perpetual System
3/12/2012
Accounts Payable
$1,200
Merchandise Inventory
$ 24
Cash
1176
Paid the $1,200 invoice on 3/2/2012 less the discount of
$24 ($1,200 x 2%)
Purchase Discounts – Periodic System
Crazy about Computers records the payment of merchandise for $1,200 on
March 2, 2012. Crazy about Computers pays the invoice on March 12, 2012 and
is able to take the discount.
Periodic System
3/12/2012
Accounts Payable
Purchase Discounts
Cash
$1200
$
24
1176
Paid the $1,200 invoice on 3/02/2012 less the discount
of $24 ($1200 x 2%)
Recording Purchase Returns
And Allowances
Purchase Returns – returns goods that have been acquired
Purchase Allowances – reduction in the cost of defective merchandise acquired
Invoice Number
Great Geeks Electronics
322012
12 Main Street
Date – March 2, 2012
Many, MN 55343
Crazy about
Computers
30 Computer Court
Sioux Falls, SD
P O Date 3/1/2012 Terms 2/10, n/30 Freight FOB Destination FedEx
66330
Model No.
GG334
Description
Longitude
Quantity
4
Total
Price
$300
Amount
$1,200
$1,200
Purchase Returns- Perpetual System
Crazy about Computers records the return of defective merchandise that cost
$300.
Perpetual System
3/4/2012
Accounts Payable
$ 300
Merchandise Inventory
$ 300
Record the return of merchandise purchased on
3/2/2012.
Purchase Returns – Periodic System
Crazy about Computers records the return of defective merchandise that cost
$300.
Periodic System
3/04/2012
Accounts Payable
Purchase Returns
$ 300
$300
To record the return of merchandise purchased on
3/02/2012.
PROPERTIES
On passing, ‘Finish’ button:
On failing, ‘Finish’ button:
Allow user to leave quiz:
User may view slides after quiz:
User may attempt quiz:
Goes to Next Slide
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At any time
At any time
Unlimited times
Recording Sale of Merchandise
Sale is recorded when ownership is
transferred
Customer purchases and takes
possession of goods
Wholesaler merchandiser written
agreement determines transfer FOB
shipping point or FOB destination
Recording Sale Of Merchandise
Crazy about Computers sells merchandise on March 20, 2012. The invoice
provides the detail of the transaction as shown below.
Invoice Number 33
Date – March 20, 2012
To: Joe Jock
33 Jock Way, Cool, ND
Crazy about Computers
30 Computer Court
Sioux Falls, SD 66330
Terms 2/10, n/30
Model No.
3343
Description
LX3
Quantity
1
Price
$1,500
Amount
$1,500
Total
$1,500
Recording Sale Of Merchandise
Perpetual System
3/20/2012
3/20/2012
Accounts Receivable
Sales
To record the credit sale.
$1,500
$1,500
Cost of Goods Sold
$1,100
Merchandise Inventory
$1,100
To record the cost of the merchandise sold.
Recording Sale Of Merchandise
Periodic System
3/20/2012
Accounts Receivable
Sales
To record the credit sale.
$1,500
$1,500
Recording Sales Discounts
Perpetual and Periodic Systems
Joe Jack paid the invoice from March 20, 2012 by taking advantage of the 2%
discount. Crazy about Computers received the payment on March 28, 2012
3/28/2012
Cash
$1,470
Sales Discounts
30
Accounts Receivable $1,500
To record payment on 3/20/2012 sale.
Completing The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Completing the Accounting Cycle
Cost of Goods
Purchased
Beginning Inventory
Cost of Goods Available
for Sale
Cost of Goods Sold
Income Statement Account
Ending Inventory
Balance Sheet Account
Completing The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Step 5
Prepare a
post closing
trial balance
#6
step
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Journalize
and post
adjusting
entries
Adjusting Journal Entries
Crazy About Computers
Accounting Worksheet
December 31, 2012
Trial Balance
Account
Debit
Cash
3,000
Acc Receivable
1,500
Inventory
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
1,000
Cost of Goods
Sold
9,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
500
1,000
25,500
25,500
1,000
1,000
2,000
11,000
11,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equip
2,000
2,000
2,000
36,000
Credit
2,000
25,000
Sales Discounts
Debit
2,000
1,000
Sales
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equip
Own withdraw
Credit
Adjusted Trial
Balance
36,000
11,500
11,500
38,500
38,500
Net Inc
21,000
25,500
4,500
25,500
4,500
25,500
17,500
17,500
Adjusting Journal Entries
At the end of the period, a physical count of inventory is required. The perpetual
system documented $2,500 in ending inventory. The physical count determined
an ending inventory of $500. An adjusting journal entry is made to record the
correct ending inventory.
12/31/2012
Cost of Goods Sold $2,000
Inventory
$2,000
To adjust the ending inventory based on a physical
count at year end.
Completing The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Prepare a
post closing
trial balance
Post to the
ledger
Journalize
and post
adjusting
entries
#6
step
Step
8
Journalize
and post
closing
entries
Prepare a
trial balance
Prepare
financial
statements
Prepare an
adjusted
trial balance
Posting Closing Entries
Revenue
$25,500
Income Summary $25,500
To close out the revenue account for the period
ending 12/31/2012
Income Summary $21,000
Sales Discounts
$ 1,000
Cost of Goods Sold
11,000
Rent Expense
7,000
Depreciation Expense
2,000
To close out the income statement accounts for
the period ending 12/31/2012
Forms of Financial Statements
Multi-step Income
Statement
Prepare
an
Adjusted
Trial
Balance
Single-step Income
Statement
Computer Giant, Inc.
Income Statement for the Period Ending December 31, 2012
Sales
$660,000
Less: Sales discounts
$ 5,000
Sales returns & allowances
2,000
Net Sales
7,000
$653,000
Cost of Goods Sold
Beginning inventory, Jan 1
Add: Purchases
Multi-Step
Income
Statement
$120,000
$230,000
Freight In
$10,000
Less: Purchase discounts
Purchase returns
(2,400)
(3,600)
Net Purchases
234,000
Goods available for sale
354,000
Less: Ending inventory, Dec 31
71,000
Cost of goods sold
283,000
Gross profit
Selling & Admin – Advertising
Freight-out
Depreciation
Utilities
Salaries
General & Admin Salaries
370,000
$70,000
4,000
28,000
11,000
29,000
17,000
Utilities
22,000
Rent
68,000
Income before tax
Income tax expense
142,000
$63,000
Depreciation
Other – Loss on sale of land
Net income
Prepare
an
Adjusted
Trial
Balance
170,000
9,000
$49,000
10,000
$39,000
Single-Step
Income
Statement
Computer Giant, Inc.
Income Statement for the Period Ending
December 31, 2012
Net Sales
$653,000
Expenses and losses
Cost of Goods Sold
$283,000
Selling Expenses
142,000
General and administrative
170,000
Loss on sale of land
Income before tax
Less Income Tax Expense
Net Income
Prepare
an
Adjusted
Trial
Balance
9000
49,000
10,000
39,000
PROPERTIES
On passing, ‘Finish’ button:
On failing, ‘Finish’ button:
Allow user to leave quiz:
User may view slides after quiz:
User may attempt quiz:
Goes to Next Slide
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Unlimited times
Summary
• Merchandising operations
• Recording purchases of merchandise
• Recording sales of merchandise
• Completing the accounting cycle
• Forms of financial statements

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