Chapter Five

Challenge Exercise 1 Expands on: E5-2 LO: 2 Information related to Pagnucci Co. is presented below. . On !pril 5" purc#ased merc#andise from $oc%ingbird Compan& for '2("((( terms 2) (" net)*(" +O, s#ipping point. 2. On !pril - paid freig#t costs of '5(( on merc#andise purc#ased from $oc%ingbird. *. On !pril ." purc#ased e/uipment on account for '20"(((. 1. On !pril 2" returned damaged merc#andise to $oc%ingbird Compan& and was granted a '*"((( credit for returned merc#andise. 5. On !pril 5 paid t#e amount due to $oc%ingbird Compan& in full. Instructions: 3a4 Prepare t#e 5ournal entries to record t#ese transactions on t#e boo%s of Pagnucci Co. under a perpetual in6entor& s&stem. 3b4 On !pril 2(" Pagnucci sold -(7 of t#e goods purc#ased from $oc%ingbird. 8#at amount would t#e& record as cost of goods sold9 3c4 :ow would t#e !pril - entr& be different if t#e '5(( was paid to s#ip goods to a customer 3rat#er t#an for s#ipping costs for goods purc#ased49 3d4 !ssume t#at Pagnucci Co. paid t#e balance due to $oc%ingbird Compan& on $a& 1 instead of !pril 5. Prepare t#e 5ournal entr& to record t#is pa&ment.

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Challenge Exercise 2 Expands on: E5-* LO: 2" * On ;eptember " <#ea Office ;uppl& #ad an in6entor& of *( calculators at a cost of '2( eac#. =#e compan& uses a perpetual in6entor& s&stem. >uring ;eptember" t#e following transactions occurred. ;ept. - Purc#ased .( calculators at '22 eac# from >ann& Co. for cas#. 0 Paid freig#t of '.( on calculators purc#ased from >ann& Co. ( <eturned 2 calculators to >ann& Co. for '1- credit 3including freig#t4 because t#e& did not meet specifications. 2 ;old ** calculators 3*( costing '2(" and * costing '2* including freig#t4 for '** eac# to ?reat ,ig ,oo% ;tore" terms n)*(. 1 ?ranted credit of '** to ?reat ,ig ,oo% ;tore for t#e return of one calculator t#at was not ordered. 2( ;old 1( calculators costing '2* for '** eac# to ,us#@s Card ;#op" terms n)*(. Instructions: a4 AournaliBe t#e ;eptember transactions. b4 8#at amount would <#ea report as net sales in t#e ;eptember income statement9 c4 8#at amount would <#ea report as gross profit in t#e ;eptember income statement9

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Challenge Exercise 3 Expands on: E5-5 LO: * Presented below are transactions related to ;tealer@s Compan&. . On >ecember *" ;tealer@s Compan& sold '1(("((( of merc#andise to ;#arif Co." terms 2) (" n)*(" +O, s#ipping point. =#e cost of t#e merc#andise sold was '21("(((. 2. On >ecember 2" ;#arif Co. was granted an allowance of ' 0"((( for merc#andise purc#ased on >ecember *. *. On >ecember *" ;tealer@s Compan& recei6ed t#e balance due from ;#arif Co. Instructions: 3a4 Prepare t#e 5ournal entries to record t#ese transactions on t#e boo%s of ;tealer@s Compan& using a perpetual in6entor& s&stem. 3b4 !ssume t#at ;tealer@s Compan& recei6ed t#e balance due from ;#arif Co. on Aanuar& 2 of t#e following &ear instead of >ecember *. Prepare t#e 5ournal entr& to record t#e receipt of pa&ment on Aanuar& 2. 3c4 4 8#at is t#e difference between a ;ales <eturn and a ;ales !llowance9 24 :ow would t#e 5ournal entr& on >ecember 2 be different if it was a ;ales <eturn instead of a ;ales !llowance9

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Challenge Exercise 4 Expands on: E5-. LO: 1 Craig +erguson Compan& #ad t#e following account balances at &ear-end: Cost of ?oods ;old '.("(((C In6entor& ' ."5((C Operating Expenses '**"(((C ;ales <e6enue ' 2-"(((C ;ales >iscounts ' "1((C and ;ales <eturns and !llowances ' "05(. ! p#&sical count of in6entor& determines t#at in6entor& on #and is ' -"15(. Instructions: 3a4 Prepare t#e ad5usting entr& necessar& as a result of t#e p#&sical count. 3b4 Prepare closing entries. 3c4 !ssume t#at t#e p#&sical count of in6entor& indicated t#at in6entor& on #and is ' ."2(( 3t#e account still s#ows a balance of ' ."5(( due to errors made during t#e &ear. Prepare t#e ad5usting entr& necessar& as a result of t#e p#&sical count. 3d4 8#at is Craig +erguson Compan&@s net income for t#e &ear9

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Challenge Exercise 5 Expands on: E5- ( LO: 5 In its income statement for t#e &ear ended 2)* ) 1" ,ec%#am Compan& reported t#e following condensed data: Operating expenses ' " 12"((( Interest re6enue ' *5"((( Cost of goods sold "1(("((( Loss on disposal of plant assets ("((( Interest expense 22"((( Det sales 2"25("((( Instructions: 3a4 Prepare a multiple-step income statement. 3b4 Prepare a single-step income statement. 3c4 :ow did ,ec%#am compute t#e amount it is reporting as net sales9 3d4 8#& are some expenses reported as EOt#er expensesF in t#e multiple-step income statement9

Challenge Exercise 6
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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Expands on: E5- 1 LO: 5" Presented below is financial information for two different companies. Giet Daise Compan& Compan& ;ales re6enue ' 2("((( ' 3e4 ;ales discounts 2"((( 2"5(( ;ales returns 3a4 5"((( Det sales . "((( 2(("((( Cost of goods sold (*"((( 3f4 ?ross profit 3b4 2("((( Operating expenses 15"((( 3g4 Income from operations 3c4 5 "((( Ot#er re6enues 3expenses4 1"((( 3#4 Det income 3d4 10"((( Instructions: 3a4 >etermine t#e missing amounts abo6e. 3b4 >etermine t#e gross profit rates. 3<ound to one decimal place.4

Challenge Exercise 7 Expands on: E5- 5 LO: .

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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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=#e trial balance of !lexei Compan& at t#e end of its fiscal &ear" !ugust * " 2( 1" includes t#ese accounts: In6entor& '2("(((C Purc#ases ' -0"(((C ;ales <e6enue '22("(((C +reig#t-In '5"(((C ;ales >iscounts '*"2((C ;ales <eturns and !llowances '*"2((C +reig#t-Out ' "5((C Purc#ase >iscounts '2"0(( and Purc#ase <eturns and !llowances '2"1((. =#e ending In6entor& is '2."(((. Instructions: 3a4 Prepare a cost of goods sold section for t#e &ear ending !ugust * 3periodic in6entor&4. 3b4 Compute !lexei@s gross profit and gross profit rate.

Challenge Exercise 8 Expands on: E5- 2 LO: 2 =#is information relates to ,or%ows%i Co. . On !pril 5 purc#ased merc#andise from >. $uneB Compan& for '*("(((" terms 2) (" net)*(" +O, s#ipping point. 2. On !pril - paid freig#t costs of ' "2(( on merc#andise purc#ased from >. $uneB Compan&.
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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*. On !pril . purc#ased e/uipment on account for '11"(((. 1. On !pril 2 returned some of !pril 5 merc#andise to >. $uneB Compan& w#ic# cost '*"2((. 5. On !pril 5 paid t#e amount due to >. $uneB Compan& in full. Instructions: 3a4 Prepare t#e 5ournal entries to record t#ese transactions on t#e boo%s of ,or%ows%i Co. using a periodic in6entor& s&stem. 3b4 !ssume t#at ,or%ows%i Co. paid t#e balance due to >. $uneB Compan& on $a& 1 instead of !pril 5. Prepare t#e 5ournal entr& to record t#is pa&ment. 3c4 !ssume ,or%ows%i sold some of t#e goods purc#ased to a customer. :ow would t#e entries be different if ,or%ows%i used t#e periodic met#od or t#e perpetual met#od9

Challenge Exercise 9 Expands on: E5-2 LO: . =#e trial balance columns of t#e wor%s#eet for ?ra& Compan& at Aune *(" 2( 1" are as follows. ?<!H CO$P!DH 8or%s#eet
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Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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+or t#e $ont# Ended Aune *(" 2( 1 =rial ,alance >ebit Credit ' 2"1(( 2"5(( "2(( 2"((( ' "1(( 5"((( *"((( 1("5(( "((( 2("-(( ("2(( '10"0((

!ccount =itles Cas# !ccounts <ecei6able Prepaid Insurance In6entor& !ccounts Pa&able Common ;toc% <etained Earnings ;ales ;ales <eturns and !llowances Cost of ?oods ;old Operating Expenses

'10"0((

Ot#er data: Operating expenses incurred on account w#ic# #a6e not &et been recorded total ' " ((. =#e balance in prepaid insurance is a one-&ear polic& ac/uired $arc# " 2( 1 3assume insurance expense is an operating expense4. Instructions: Enter t#e trial balance on a wor%s#eet and complete t#e wor%s#eet.

Copyright 2012 John Wiley & Sons, Inc. #For Instr ctor $se %nly&

Weygandt, Financial and Managerial Acco nting, Challenge !"ercises

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