Chapter 5
Chapter 5
Chapter 5
Inventory
Debit Credit
Balance 3,580
LO 2
Purchase Discounts
LO 2
Freight Costs
Illustration 5-7
Shipping terms
Freight costs incurred by the seller are an
operating expense.
LO 2
Freight Costs
LO 2
Purchase Returns and Allowances
LO 2
Purchase Returns and Allowances
LO 2
Purchase Discounts
Advantages:
LO 2
Purchase Discounts
LO 2
Summary of Purchasing Transactions
Inventory
Debit Credit
Balance 3,580
LO 2
Recording Sales of Merchandise
LO 3
Sales
A. June 4 – Made a sale of $2,500 on account with a credit
term of 2/10, n/30. The merchandise cost $1,000.
B. June 5 – Paid $100 for delivery of goods sold on June 4 to
customers.
C. June 6 – Customers returned goods that had a $300 selling
price, a $140 cost. The goods were not defective.
D. June 7 - Customers returned goods that had a $600 selling
price, a $280 cost. Assume the returned goods were
defective and had a scrap value of $50.
E. June 8 – Customers paid the balance due of $1,600 (gross
invoice price of $2,500 less purchase returns and allowances
of $900) on May 7, the last day of the discount period.
Recording Sales of Merchandise
LO 3
Sales Returns and Allowances
LO 3
Sales Returns and Allowances
8 Inventory 140
Cost of Goods Sold 140
LO 3
Sales Returns and Allowances
8 Inventory 50
Cost of Goods Sold 50
LO 3
Sales Discount
LO 3
Sales Discount
LO 3
Illustration 5-14
Multiple-
Step
Key Items:
Net sales
Illustration 5-14
LO 5
Classified Balance Sheet
Illustration 5-16
LO 5
Part 2
Illustration 5B-2
LO 7
Recording Sales of Merchandise
COMPARISON OF ENTRIES
Illustration 5B-3
LO 7
Recording Sales of Merchandise
COMPARISON OF ENTRIES
Illustration 5B-3
LO 7
Recording Merchandise Transactions
LO 7
LEARNING APPENDIX 5B: Record purchases and
OBJECTIVE
7
sales under a periodic inventory system.
LO 7
Recording Purchases of Merchandise
LO 7
Recording Purchases of Merchandise
FREIGHT COSTS
Illustration: If Sauk pays Public Freight Company $150
for freight charges on its purchase from PW Audio Supply on
May 6, the entry on Sauk’s books is:
LO 7
Recording Purchases of Merchandise
LO 7
Recording Purchases of Merchandise
PURCHASE DISCOUNTS
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. Sauk
Stereo records the payment and discount as follows.
LO 7
Recording Sales of Merchandise
LO 7
Recording Sales of Merchandise
LO 7
Recording Sales of Merchandise
SALES DISCOUNTS
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.
LO 7
LEARNING Compare a multiple-step with a single-
OBJECTIVE
5
step income statement.
LO 5
Illustration 5-14
Multiple-
Step
Key Items:
Net sales
Illustration 5-14
LO 5
Illustration 5-14
Multiple-
Step
Key Items:
Net sales
Gross profit
Illustration 5-14
LO 5
Illustration 5-14
Multiple-
Step
Key Items:
Net sales
Gross profit
Operating
expenses
Illustration 5-14
LO 5
Multiple-
Step
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
Illustration 5-14
LO 5
Multiple-
Step
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
Illustration 5-14
LO 5
Multiple-
Step
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
Net income
Illustration 5-14
LO 5
Single-Step Income Statement
LO 5
Single-Step Income Statement
Illustration 5-15
LO 5
Classified Balance Sheet
Illustration 5-16
LO 5