Copyright 2015 McGraw-Hill Education (Asia)

All rights r!s!r"!d

Chapter 6
6-2
1
.
P
u
r
c
h
a
s
e

o
f

g
o
o
d
s
3
.

C
o
l
l
e
c
t
i
o
n

o
f

t
h
e

r
e
c
e
i
v
a
b
l
e
s
2. Sale of goods on
account
Cash
Inventory
Accounts
Receivable
6-3
Merchandising
Comany
Purchase
inventory in
ready!to!sell
condition.
Manufacturing
Comany
Manufacture
inventory and
have a longer and
more comle"
oerating cycle.
6-4
Retailers sell goods
directly to the ublic.
#holesalers buy goods
from several different
manufacturers and then
resell these goods to
several retailers.
6-5
Cost of
goods sold
reresents
the e"ense
of goods that
are sold
to
customers.
$ross rofit is a useful means of measuring the
rofitability of sales transactions.
6-6
Control Account
Subsidiary %edgers
6-7
On 5 September, Worley Co. purchased
100 laser lights for resale for $0 per
unit from !lectronic City on account.
6-8
On 10 September, Worley Co. sold 10 laser
lights for $50 per unit on account to "#C
$adios.
1& ' (3& ) (3&&
1& ' (3& ) (3&&
Cost
Retail
6-9
On 15 September, Worley Co. paid
!lectronic City $,000 for the
5 September purchase.
6-10
On %% September, Worley Co. recei&ed
$500 from "#C $adios as payment in full
for their purchase on 10 September.
6-11
In order to ensure the accuracy of their eretual
records* most businesses ta+e a comlete hysical
count of the inventory on hand at least once a year.
,n 31 -ecember* #orley Co. counts its inventory.
An inventory shortage of (2*&&& is discovered.
Reasonable amounts of inventory shrin+age are vie.ed as a
normal cost of doing business.
/"amles include brea+age* soilage and theft.
6-12
Close Revenue accounts
0including Sales1 to Income
Summary.
Close /"ense accounts
0including Cost of $oods
Sold1 to Income Summary.
Close Income Summary
account to Retained
/arnings.
Close -ividends to Retained
/arnings.
2he closing
entries are the
same3
6-13
6-14
On 5 September, Worley Co. purchased
100 laser lights for resale for $0 per
unit from !lectronic City on account.
4otice that no entry is
made to Inventory.
4otice that no entry is
made to Inventory.
6-15
On 10 September, Worley Co. sold 10
laser lights for $50 per unit on account
to
"#C $adios.
Retail
6-16
On 15 September, Worley Co. paid
!lectronic City $,000 for the
5 September purchase.
6-17
On %% September, Worley Co. recei&ed
$500 from "#C $adios as payment in
full for their purchase on 10 September.
6-18
2he accounting records of Party
Suly sho. the follo.ing5
Inventory* 1 6an. ( 17*&&&
Purchases 0during year1 13&*&&&
Inventory* 31 -ec. 12*&&&
2he accounting records of Party
Suly sho. the follo.ing5
Inventory* 1 6an. ( 17*&&&
Purchases 0during year1 13&*&&&
Inventory* 31 -ec. 12*&&&
Inventory 0beginning of the year1 17*&&& (
Add5 Purchases 13&*&&&
Cost of goods available for sale 177*&&&
%ess5 Inventory 0end of year1 12*&&&
Cost of goods sold 132*&&& (
6-19
Party Suly must create the
Cost of $oods Sold account.
Party Suly must record the
ending inventory amount.
6-20
6-21
2/10, n/30
Percentage
of
-iscount
8 of -ays
-iscount Is
Available
,ther.ise*
the 9ull
Amount Is
-ue
8 of -ays
.hen 9ull
Amount Is
-ue
Read as5 :2.o ten* net thirty;
#hen manufacturers and .holesalers sell
their roducts on account* the credit terms
are stated in the invoice.
6-22
(7*&&& X <=> ) (3*<2&
(7*&&& X <=> ) (3*<2&
On 6 July, Jack & Jill, Co. purchas! "4,000 o#
$oo!s on cr!i% &i%h %r's o#
2(10, n(30 #ro' )i!*s Clo%hs.
+rpar %h ,ournal n%ry #or Jack & Jill, Co.
6-23
On 15 July, Jack & Jill, Co. pays %h #ull
a'oun% !u %o )i!*s Clo%hs. +rpar
%h ,ournal n%ry #or Jack & Jill, Co.
6-24
'o(, assume that )ac* + )ill, Co. (aited
until %0 )uly to pay the amount due in
full to ,id-s Clothes.
.repare the /ournal entry for )ac* + )ill,
Co.
4onoerating /"ense
4onoerating /"ense
6-25
On 6 July, Jack & Jill, Co. purchas! "4,000
o# $oo!s on cr!i% &i%h %r's o# 2(10, n(30
#ro' )i!*s Clo%hs.
+rpar %h ,ournal n%ry #or Jack & Jill, Co.
6-26
Reduces Cost of
$oods Sold
Reduces Cost of
$oods Sold
(7*&&& X <=> ) (3*<2&
(7*&&& X <=> ) (3*<2&
On 15 )uly, )ac* + )ill, Co. pays the full
amount due to ,id-s Clothes.
.repare the /ournal entry for )ac* + )ill, Co.
6-27
'o(, assume that )ac* + )ill, Co. (aited
until %0 )uly to pay the full amount due
to ,id-s Clothes.
.repare the /ournal entry for )ac* + )ill,
Co.
6-28
(?&& X <=> ) (7<&
(?&& X <=> ) (7<&
#n 5 August$ %ac& ' %ill$ Co r!turn!d
(500 o) unsatis)actory goods
purchas!d )ro* +id,s Cloth!s on
cr!dit t!r*s o) 2-10$ n-.0 /h!
purchas! was originally r!cord!d at
n!t cost 0r!par! th! !ntry )or %ac&
' %ill$ Co
6-29
2ransortation costs related to
the ac@uisition of assets are art
of the cost of the asset being
ac@uired.
2ransortation costs related to
the ac@uisition of assets are art
of the cost of the asset being
ac@uired.
6-30
Credit terms and goods returns affect the
amount of revenue earned by the seller.
6-31
On % "ugust, ,id-s Clothes sold $%,000 of goods
to )ac* + )ill, Co. on credit terms %010, n00.
,id-s Clothes originally paid $1,000 for the
goods.
#ecause ,id-s Clothes uses a perpetual in&entory
system, they must ma*e t(o entries.
6-32
Contra!revenue
Contra!revenue
On 5 "ugust, )ac* + )ill, Co. returned $500 of
unsatisfactory goods to ,id-s Clothes from the
% "ugust sale. ,id-s Clothes cost for this
goods (as $%50.
#ecause ,id-s Clothes uses a perpetual
in&entory system, they must ma*e t(o entries.
6-33
On 6 )uly, ,id-s Clothes sold $1,000 of goods to
)ac* + )ill, Co. on credit (ith terms of %010,
n00. 2he goods originally cost ,id-s Clothes
$%,000.
#ecause ,id-s Clothes uses a perpetual
in&entory system, they must ma*e t(o entries.
6-34
(7*&&& X <=> ) (3*<2&
(7*&&& X <=> ) (3*<2&
Contra!revenue
Contra!revenue
On 15 )uly, ,id-s Clothes recei&es the full
amount due from )ac* + )ill, Co. from the
6 )uly sale.
.repare the /ournal entry for ,id-s Clothes.
6-35
'o(, assume that it (asn-t until %0 )uly
that ,id-s Clothes recei&ed the full
amount due from )ac* + )ill, Co. from the
6 )uly sale.
.repare the /ournal entry for ,id-s Clothes.
6-36
-elivery costs incurred by sellers
are debited to -elivery /"ense* an
oerating e"ense.
-elivery costs incurred by sellers
are debited to -elivery /"ense* an
oerating e"ense.
6-37
Ausinesses collect sales ta" at the oint
of sale.
2hen* they remit the ta" to the
aroriate governmental agency at
times secified by la..
(1&*&&& sale X7> ta" ) (B&& sales ta"
(1&*&&& sale X7> ta" ) (B&& sales ta"
6-38
Most businesses use secial Cournals
rather than a general Cournal to record
routine transactions that occur
fre@uently.
6-39
4et Sales
$ross
Profit
Rates
- 2rends over time
- Comarable store sales
- Sales er s@uare foot of
selling sace
- 2rends over time
- Comarable store sales
- Sales er s@uare foot of
selling sace
- $ross rofit 4et sales
- ,verall gross rofit rate
- $ross rofit rates by
deartments and roducts
- $ross rofit 4et sales
- ,verall gross rofit rate
- $ross rofit rates by
deartments and roducts
6-40
Sales discounts and allo.ances are contra!revenue
accounts. Sales discounts and allo.ances reduce
gross sales. As such* rofit .ill be incorrect if
discounts and allo.ances are not roerly recorded.
2he ressure brought to bear on subordinates to
imlement fraudulent schemes develoed by to
management can often be intense. 2o management
can threaten emloyees .ith termination if they fail to
articiate in the fraud. Dnfortunately* emloyees
.ho ac@uiesce to such ressure face tremendous
legal ris+s.
6-41