slide 5-1 replace with title page for weygandt financial 7e
TRANSCRIPT
Slide 5-1
Replace with Title Page for Weygandt Financial 7e
Slide 5-2
Chapter 5Accounting for Accounting for Merchandising Merchandising
OperationsOperations
Financial Accounting, Seventh Edition
Slide 5-3
1. Identify the differences between service and merchandising companies.
2. Explain the recording of purchases under a perpetual inventory system.
3. Explain the recording of sales revenues under a perpetual inventory system.
4. Explain the steps in the accounting cycle for a merchandising company.
5. Distinguish between a multiple-step and a single-step income statement.
6. Explain the computation and importance of gross profit.
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
Slide 5-4
Forms of Forms of Financial Financial
StatementsStatements
Forms of Forms of Financial Financial
StatementsStatements
Accounting for Merchandising OperationsAccounting for Merchandising OperationsAccounting for Merchandising OperationsAccounting for Merchandising Operations
Freight costsFreight costs
Purchase Purchase returns and returns and allowancesallowances
Purchase Purchase discountsdiscounts
Summary of Summary of purchasing purchasing transactionstransactions
MerchandisingMerchandising
OperationsOperations
MerchandisingMerchandising
OperationsOperations
Recording Recording Purchases of Purchases of MerchandiseMerchandise
Recording Recording Purchases of Purchases of MerchandiseMerchandise
Recording Recording Sales of Sales of
MerchandiseMerchandise
Recording Recording Sales of Sales of
MerchandiseMerchandise
Completing Completing the the
Accounting Accounting CycleCycle
Completing Completing the the
Accounting Accounting CycleCycle
Operating Operating cyclescycles
Flow of costsFlow of costs—perpetual —perpetual and periodic and periodic inventory inventory systemssystems
Sales returns Sales returns and and allowancesallowances
Sales Sales discountsdiscounts
Adjusting Adjusting entriesentries
Closing Closing entriesentries
Summary of Summary of merchandising merchandising entriesentries
Multiple-step Multiple-step income income statementstatement
Single-step Single-step income income statementstatement
Classified Classified balance sheetbalance sheet
Slide 5-5
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.
Merchandising Merchandising CompaniesCompanies
Buy and Sell Goods
Wholesaler Retailer Consumer
The primary source of revenues is referred to as sales revenue or sales.
Slide 5-6
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
Income MeasurementIncome Measurement
Illustration 5-1
Cost of goods sold is the total cost of merchandise
sold during the period.
Not used in a Service business.
Net Income (Loss)
Less
LessEquals
Equals
SalesRevenue
Cost of Goods Sold
Gross Profit
Operating Expenses
SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.
Slide 5-7
The operating cycle of a merchandising company ordinarily is longer than that of a service company.
Illustration 5-2
SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
Operating Cycle
Slide 5-8
Perpetual System
1. Purchases increase Merchandise Inventory.
2. Freight costs, Purchase Returns and Allowances and
Purchase Discounts are included in Merchandise Inventory.
3. Cost of Goods Sold is increased and Merchandise Inventory
is decreased for each sale.
4. Physical count done to verify Merchandise Inventory
balance.The perpetual inventory system provides a continuous
record of Merchandise Inventory and Cost of Goods Sold.
SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
Flow of Costs
Slide 5-9
1. Purchases of merchandise increase Purchases.
2. Ending Inventory determined by physical count.
3. Calculation of Cost of Goods Sold:
Beginning inventory
$ 100,000
Add: Purchases, net
800,000
Goods available for sale
900,000
Less: Ending inventory
125,000
Cost of goods sold
$ 775,000
SO 1 Identify the differences between service and merchandising SO 1 Identify the differences between service and merchandising companies.companies.
Merchandising OperationsMerchandising OperationsMerchandising OperationsMerchandising Operations
Flow of CostsPeriodic System
Slide 5-10
Slide 5-11
Made using cash or credit (on account).
Normally recorded when goods are received.
Purchase invoice should support each credit purchase.
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Illustration 5-5
Slide 5-12
Under the perpetual inventory system, companies record in the Merchandise Inventory account the purchase of goods they intend to sell.
Illustration:Illustration: From INVOICE NO. 731 (Illustration 5-5) record the journal entry Sauk Stereo would make to record its purchase from PW Audio Supply.
Merchandise inventory 3,800May 4
Accounts payable 3,800
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-13
Illustration 5-6
Seller places goods Free On Board the carrier,
and buyer pays freight costs.
Seller places goods Free On Board to the buyer’s place of business, and
seller pays freight costs.
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Freight Costs – Terms of – Terms of SaleSale
Freight costs incurred by the seller are an operating expense.
SO 2SO 2
Slide 5-14
Illustration: Assume upon delivery of the goods on May 6, Sauk Stereo pays Acme Freight Company $150 for freight charges, the entry on Sauk Stereo’s books is:
Merchandise inventory 150May 6
Cash 150
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Assume the freight terms on the invoice in Illustration 5-5 had required PW Audio Supply to pay the freight charges, the entry by PW Audio Supply would have been:
Freight-out (or Delivery Expense) 150May 6
Cash 150
Slide 5-15
Purchaser may be dissatisfied because goods are damaged or defective, of inferior quality, or do not meet specifications.
Purchase Returns and Allowances
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Return goods for credit if the sale was made on
credit, or for a cash refund if the purchase
was for cash.
May choose to keep the merchandise if the seller will grant an
allowance (deduction) from the purchase
price.
Purchase Return Purchase Allowance
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-16
In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:
a. Purchases
b. Purchase Returns
c. Purchase Allowance
d. Merchandise Inventory
QuestionQuestion
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-17
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Illustration: Assume that on May 8 Sauk Stereo returned to PW Audio Supply goods costing $300.
Accounts payable 300May 8
Merchandise inventory 300
Slide 5-18
Credit terms may permit buyer to claim a cash discount for prompt payment.
Advantages:
Purchaser saves money.
Seller shortens the operating cycle.
Purchase Discounts
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Example: Credit terms of 2/10, n/30, is read “two-ten, net thirty.” 2% cash discount if payment is made within 10 days.
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-19
Purchase Discount TermsTerms
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
2% discount if paid within 10
days, otherwise net amount due
within 30 days.
1% discount if paid within
first 10 days of next month.
2/10, n/30 1/10 EOM
Net amount due within the first 10 days of the next
month.
n/10 EOM
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-20
Merchandise Inventory 70
Accounts payable 3,500May 14
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
(Discount = $3,500 x 2% = $70)
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Illustration: Assume Sauk Stereo pays the balance due of $3,500 (gross invoice price of $3,800 less purchase returns and allowances of $300) on May 14, the last day of the discount period. Prepare the journal entry Sauk makes to record its May 14 payment.
Cash 3,430
Slide 5-21
Accounts payable 3,500June 3
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Cash 3,500
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Illustration: If Sauk Stereo failed to take the discount, and instead made full payment of $3,500 on June 3, the journal entry would be:
Slide 5-22
Should discounts be taken when offered?
Purchase Discounts
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Discount of 2% on $3,500 70.00$
$3,500 invested at 10% f or 20 days 19.18
Savings by taking the discount 50.82$
Example: 2% for 20 days = Annual rate of 36.5% (365/20 = 18.25 twenty-day periods x 2% = 36.5%)
Passing up the discount offered equates to paying an interest rate of 2% on the use of $3,500 for 20 days.
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-23
Merchandise I nventory
Debit Credit
$3,800 8th - Return$300
Balance
4th - Purchase
$3,580$3,580
70 14th - Discount
Recording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of MerchandiseRecording Purchases of Merchandise
Summary of Purchasing Summary of Purchasing TransactionsTransactions
1506th – Freight-in
IllustrationIllustration
SO 2 Explain the recording of purchases under a perpetual inventory SO 2 Explain the recording of purchases under a perpetual inventory system.system.
Slide 5-24
Made for cash or credit (on account).
Normally recorded when earned, usually when goods transfer from seller to buyer.
Sales invoice should support each credit sale.
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Illustration 5-5
Slide 5-25
Two Journal Entries to Record a Sale
Cash or Accounts receivable XXX
Sales XXX
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
#1
Cost of goods sold XXX
Merchandise inventory XXX
#2
Selling
Price
Cost
Slide 5-26
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Accounts receivable 3,800May 4
Sales 3,800
Illustration: Assume PW Audio Supply records its May 4 sale of $3,800 to Sauk Stereo (Illustration 5-5) as follows. Assume the merchandise cost PW Audio Supply $2,400.
Cost of goods sold 2,4004
Merchandise inventory 2,400
Slide 5-27
“Flipside” of purchase returns and allowances.
Contra-revenue account (debit).
Sales not reduced (debited) because:
would obscure importance of sales returns and
allowances as a percentage of sales.
could distort comparisons between total sales
in different accounting periods.
Sales Returns and Allowances
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Slide 5-28
Illustration: Prepare the entry PW Audio Supply would make to record the credit for returned goods that had a $300 selling price (assume a $140 cost). Assume the goods were not defective.
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Sales returns and allowances 300May 8
Accounts receivable300
Merchandise inventory 1408
Cost of goods sold140
Slide 5-29
Illustration: Assume the returned goods were defective and had a scrap value of $50, PW Audio would make the following entries:
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Sales returns and allowances 300May 8
Accounts receivable300
Merchandise inventory 508
Cost of goods sold50
Slide 5-30
The cost of goods sold is determined and recorded each time a sale occurs in:
a. periodic inventory system only.
b. a perpetual inventory system only.
c. both a periodic and perpetual inventory system.
d. neither a periodic nor perpetual inventory system.
Review QuestionReview Question
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Slide 5-31
Slide 5-32
Offered to customers to promote prompt payment.
“Flipside” of purchase discount.
Contra-revenue account (debit).
Sales Discount
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Slide 5-33
Recording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of MerchandiseRecording Sales of Merchandise
SO 3 Explain the recording of sales SO 3 Explain the recording of sales revenues under a perpetual revenues under a perpetual inventory system.inventory system.
Cash 3,430May 14
Accounts receivable3,500
Sales discounts 70
* [($3,800 – $300) X 2%]
*
Illustration: Assume Sauk Stereo pays the balance due of $3,500 (gross invoice price of $3,800 less purchase returns and allowances of $300) on May 14, the last day of the discount period. Prepare the journal entry PW Audio Supply makes to record the receipt on May 14.
Slide 5-34
Generally the same as a service company.
One additional adjustment to make the records
agree with the actual inventory on hand.
Involves adjusting Merchandise Inventory and Cost of Goods Sold.
Adjusting Entries
Completing the Accounting CycleCompleting the Accounting CycleCompleting the Accounting CycleCompleting the Accounting Cycle
SO 4 Explain the steps in the accounting cycle for a merchandising SO 4 Explain the steps in the accounting cycle for a merchandising company.company.
Slide 5-35
Completing the Accounting CycleCompleting the Accounting CycleCompleting the Accounting CycleCompleting the Accounting Cycle
SO 4 Explain the steps in the accounting cycle for a merchandising SO 4 Explain the steps in the accounting cycle for a merchandising company.company.
Illustration: Suppose that PW Audio Supply has an unadjusted balance of $40,500 in Merchandise Inventory. Through a physical count, PW Audio determines that its actual merchandise inventory at year-end is $40,000. The company would make an adjusting entry as follows.
Cost of goods sold 500
Merchandise inventory500
Slide 5-36
Completing the Accounting CycleCompleting the Accounting CycleCompleting the Accounting CycleCompleting the Accounting Cycle
Closing Entries
Dividends
Slide 5-37
Shows several steps in determining net
income.
Two steps relate to principal operating
activities.
Distinguishes between operating and non-
operating activities.
Multiple-Step Income Statement
Forms of Financial StatementsForms of Financial StatementsForms of Financial StatementsForms of Financial Statements
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-38
Illustration 5-8
Income Statement Presentation of Sales
Multiple-Step Income StatementMultiple-Step Income StatementMultiple-Step Income StatementMultiple-Step Income Statement
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-39 SO 6 Explain the computation and importance of gross SO 6 Explain the computation and importance of gross
profit.profit.
Illustration 5-13
Key Items:Key Items:
Net salesNet sales
Gross profitGross profit
Gross profit Gross profit raterate
Illustration 5-10
Gross Profit
Multiple-Step Income StatementMultiple-Step Income StatementMultiple-Step Income StatementMultiple-Step Income Statement
Slide 5-40
Forms of Forms of Financial Financial StatementStatementss
Forms of Forms of Financial Financial StatementStatementss
Key Items:Key Items:
Net salesNet sales
Gross profitGross profit
Operating Operating expensesexpenses
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Illustration 5-13
Multiple-Step
Slide 5-41
Forms of Forms of Financial Financial StatementStatementss
Forms of Forms of Financial Financial StatementStatementss
Key Items:Key Items:
Net salesNet sales
Gross profitGross profit
Operating Operating expensesexpenses
Nonoperating Nonoperating activitiesactivities
Net incomeNet income
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Illustration 5-13
Slide 5-42
The multiple-step income statement for a merchandiser shows each of the following features except:
a. gross profit.
b. cost of goods sold.
c. a sales revenue section.
d. investing activities section.
Review QuestionReview Question
Forms of Financial StatementsForms of Financial StatementsForms of Financial StatementsForms of Financial Statements
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-43
Subtract total expenses from total revenues
Two reasons for using the single-step format:
1) Company does not realize any type of profit until total revenues exceed total expenses.
2) Format is simpler and easier to read.
Single-Step Income Statement
Forms of Financial StatementsForms of Financial StatementsForms of Financial StatementsForms of Financial Statements
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-44
Illustration 5-14
Single-Step
Forms of Financial StatementsForms of Financial StatementsForms of Financial StatementsForms of Financial Statements
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-45
Forms of Financial StatementsForms of Financial StatementsForms of Financial StatementsForms of Financial Statements
Illustration 5-15Classified Balance Sheet
SO 5 Distinguish between a multiple-step and a single-step income SO 5 Distinguish between a multiple-step and a single-step income statement.statement.
Slide 5-46
Periodic System
Separate accounts used to record purchases, freight costs, returns, and discounts.
Company does not maintain a running account of changes in inventory.
Ending inventory determined by physical count.
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Periodic Inventory SystemPeriodic Inventory SystemPeriodic Inventory SystemPeriodic Inventory System
Slide 5-47
Calculation of Cost of Goods Sold
$316,000
Illustration 5A-1
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Periodic Inventory SystemPeriodic Inventory SystemPeriodic Inventory SystemPeriodic Inventory System
Slide 5-48
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration:Illustration: On the basis of the sales invoice (Illustration
5-5) and receipt of the merchandise ordered from PW Audio Supply, Sauk Stereo records the $3,800 purchase as follows.
Purchases 3,800May 4
Accounts payable 3,800
Recording Purchases under Periodic Recording Purchases under Periodic SystemSystemRecording Purchases under Periodic Recording Purchases under Periodic SystemSystem
Slide 5-49
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration:Illustration: If Sauk pays Acme Freight Company $150for freight charges on its purchase from PW Audio Supply on May 6, the entry on Sauk’s books is:
Freight-in (Transportation-in) 150May 6
Cash 150
Freight CostsFreight Costs
Recording Purchases under Periodic Recording Purchases under Periodic SystemSystemRecording Purchases under Periodic Recording Purchases under Periodic SystemSystem
Slide 5-50
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration:Illustration: Sauk Stereo returns $300 of goods to PW Audio Supply and prepares the following entry to recognize the return.
Accounts payable 300May 8
Purchase returns and allowances 300
Purchase Returns and Purchase Returns and AllowancesAllowances
Recording Purchases under Periodic Recording Purchases under Periodic SystemSystemRecording Purchases under Periodic Recording Purchases under Periodic SystemSystem
Slide 5-51
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration: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. SaukStereo records the payment and discount as follows.
Accounts payable 3,500May 14
Purchase discounts 70
Purchase DiscountsPurchase Discounts
Cash 3,430
Recording Purchases under Periodic Recording Purchases under Periodic SystemSystemRecording Purchases under Periodic Recording Purchases under Periodic SystemSystem
Slide 5-52
No entry is recorded for cost of goods sold at the time of the sale under a periodic system.
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration:Illustration: PW Audio Supply, records the sale of $3,800 of merchandise to Sauk Stereo on May 4 (sales invoice No. 731, Illustration 5-5) as follows.
Accounts receivable 3,800May 4
Sales 3,800
Recording Sales under Periodic Recording Sales under Periodic SystemSystemRecording Sales under Periodic Recording Sales under Periodic SystemSystem
Slide 5-53
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration:Illustration: To record the returned goods received from Sauk Stereo on May 8, PW Audio Supply records the $300 sales return as follows.
Sales returns and allowances 300May 4
Accounts receivable 300
Sales Returns and AllowancesSales Returns and Allowances
Recording Sales under Periodic Recording Sales under Periodic SystemSystemRecording Sales under Periodic Recording Sales under Periodic SystemSystem
Slide 5-54
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration: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.
Sales DiscountsSales Discounts
Cash 3,430May 14
Accounts receivable3,500
Sales discounts 70
Recording Sales under Periodic Recording Sales under Periodic SystemSystemRecording Sales under Periodic Recording Sales under Periodic SystemSystem
Slide 5-55
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration 5A-2
Comparison of Entries-Perpetual vs. Comparison of Entries-Perpetual vs. Periodic Periodic Comparison of Entries-Perpetual vs. Comparison of Entries-Perpetual vs. Periodic Periodic
Slide 5-56
SO 7 Explain the recording of purchases and SO 7 Explain the recording of purchases and sales of sales of inventory under a inventory under a periodic inventory system.periodic inventory system.
Illustration 5A-2
Comparison of Entries-Perpetual vs. Comparison of Entries-Perpetual vs. Periodic Periodic Comparison of Entries-Perpetual vs. Comparison of Entries-Perpetual vs. Periodic Periodic
Slide 5-57
Illustration 5B-1
SO 8SO 8
Worksheet for a Merchandising Worksheet for a Merchandising Company Company Worksheet for a Merchandising Worksheet for a Merchandising Company Company
Slide 5-58
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