ACCOUNTING會計英語主講教師：朱靖AccountingforMerchandisingOperationsAccounting,ThirdEditionChapter5Identifythedifferencesbetweenserviceandmerchandisingcompanies.Explaintherecordingofpurchasesunderaperpetualinventorysystem.Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Explainthestepsintheaccountingcycleforamerchandisingcompany.Distinguishbetweenamultiple-stepandasingle-stepincomestatement.Explainthecomputationandimportanceofgrossprofit.Determinecostofgoodssoldunderaperiodicsystem.StudyObjectivesAccountingforMerchandisingOperationsFreightcostsPurchasereturnsandallowancesPurchasediscountsSummaryofpurchasingtransactionsMerchandisingOperationsRecordingPurchasesofMerchandiseRecordingSalesofMerchandiseCompletingtheAccountingCycleFormsofFinancialStatementsOperatingcyclesInventorysystems—perpetualandperiodicSalesreturnsandallowancesSalesdiscountsAdjustingentriesClosingentriesSummaryofmerchandisingentriesMultiple-stepincomestatementSingle-stepincomestatementClassifiedbalancesheetDeterminingcostofgoodssoldunderaperiodicsystemMerchandisingOperationsSO1Identifythedifferencesbetweenserviceandmerchandisingcompanies.MerchandisingCompaniesBuyandSellGoodsWholesalerRetailerConsumerTheprimarysourceofrevenuesisreferredtoassalesrevenueorsales.MerchandisingOperationsSO1Identifythedifferencesbetweenserviceandmerchandisingcompanies.IncomeMeasurementIllustration5-1Costofgoodssoldisthetotalcostofmerchandisesoldduringtheperiod.NotusedinaServicebusiness.NetIncome(Loss)LessLessEqualsEqualsSalesRevenueCostofGoodsSoldGrossProfitOperatingExpensesTheoperatingcycleofamerchandisingcompanyordinarilyislongerthanthatofaservicecompany.OperatingCyclesIllustration5-2SO1Identifythedifferencesbetweenserviceandmerchandisingcompanies.Features:PerpetualSystem

PurchasesincreaseMerchandiseInventory.Freightcosts,PurchaseReturnsandAllowancesandPurchaseDiscountsareincludedinMerchandiseInventory.CostofgoodssoldisincreasedandMerchandiseInventoryisdecreasedforeachsale.PhysicalcountdonetoverifyInventorybalance.TheperpetualinventorysystemprovidesacontinuousrecordofInventoryandCostofGoodsSold.InventorySystemsSO1Identifythedifferencesbetweenserviceandmerchandisingcompanies.Features:PeriodicSystem

PurchasesofmerchandiseincreasePurchases.EndingInventorydeterminedbyphysicalcount.CalculationofCostofGoodsSold:InventorySystemsBeginninginventory $100,000Add:Purchases,net 800,000Goodsavailableforsale 900,000Less:Endinginventory 125,000Costofgoodssold $775,000SO1Identifythedifferencesbetweenserviceandmerchandisingcompanies.Madeusingcashorcredit(onaccount).Normallyrecordedwhengoodsarereceived.Purchaseinvoiceshouldsupporteachcreditpurchase.RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Illustration5-4E5-2

InformationrelatedtoSteffensCo.ispresentedbelow.Preparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.OnApril5,purchasedmerchandisefromBryantCompanyfor$25,000terms2/10,net/30,FOBshippingpoint.Merchandiseinventory 25,000April5Accountspayable 25,000RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.NotallpurchasesincreaseMerchandiseInventory.E5-2

Preparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.3. OnApril7,purchasedequipmentonaccountfor$26,000.Equipment 26,000April7Accountspayable 26,000RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.TermsFOBshippingpoint

-sellerplacesgoodsFreeOnBoardthecarrier,andbuyerpaysfreightcosts.FOBdestination

-sellerplacesthegoodsFreeOnBoardtothebuyer’splaceofbusiness,andsellerpaysfreightcosts.FreightCosts

RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Freightcostsincurredbytheselleronoutgoingmerchandiseareanoperatingexpensetotheseller(Freight-outorDeliveryExpense).E5-2

ContinuedPreparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.2. OnApril6,paidfreightcostsof$900onmerchandisepurchasedfromBryant.Merchandiseinventory 900April6Cash 900RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Purchasermaybedissatisfiedbecausegoodsdamagedordefective,ofinferiorquality,ordonotmeetspecifications.PurchaseReturnsandAllowancesRecordingPurchasesofMerchandiseReturngoodsforcreditifthesalewasmadeoncredit,orforacashrefundifthepurchasewasforcash.Maychoosetokeepthemerchandiseifthesellerwillgrantanallowance(deduction)fromthepurchaseprice.PurchaseReturnPurchaseAllowanceSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Inaperpetualinventorysystem,areturnofdefectivemerchandisebyapurchaserisrecordedbycrediting:PurchasesPurchaseReturnsPurchaseAllowanceMerchandiseInventoryReviewQuestionRecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.E5-2

ContinuedPreparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.4. OnApril8,returneddamagedmerchandisetoBryantCompanyandwasgranteda$4,000creditforreturnedmerchandise.Accountspayable 4,000April8Merchandiseinventory 4,000RecordingPurchasesofMerchandiseSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Credittermsmaypermitbuyertoclaimacashdiscountforpromptpayment.Advantages:Purchasersavesmoney.Sellershortenstheoperatingcycle.PurchaseDiscounts

RecordingPurchasesofMerchandiseExample:Credittermsof2/10,n/30,isread“two-ten,netthirty.”2%cashdiscountifpaymentismadewithin10days.SO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.PurchaseDiscounts

TermsRecordingPurchasesofMerchandise2%discountifpaidwithin10days.1%discountifpaidwithinfirst10daysofnextmonth.2/101/10EOMNetamountduein30days,60days,orwithinthefirst10daysofthenextmonth.n/30,n/60,orn/10EOMSO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.E5-2

ContinuedPreparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.5. OnApril15,paidtheamountduetoBryantCompanyinfull.Accountspayable 21,000April15Merchandiseinventory 420RecordingPurchasesofMerchandiseCash 20,580(Discount=$21,000x2%=$420)SO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.E5-2

ContinuedPreparethejournalentrytorecordthetransactionunderaperpetualinventorysystem.5. OnApril15,paidtheamountduetoBryantCompanyinfull.Accountspayable 21,000April16orlaterCash 21,000RecordingPurchasesofMerchandiseWhatentrywouldbemadeifthecompanyfailedtopaywithin10days?SO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Shoulddiscountsbetakenwhenoffered?PurchaseDiscounts

RecordingPurchasesofMerchandiseExample:2%for20days=Annualrateof36.5%(365/20=18.25twenty-dayperiodsx2%=36.5%)Passingupthediscountofferedequatestopayinganinterestrateof2%ontheuseof$25,000for20days.SO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.$25,0008th-Return$4,000Balance5th-Purchase $21,48042015th-DiscountRecordingPurchasesofMerchandiseSummaryofPurchasingTransactions

9006th–Freight-inE5-2SO2Explaintherecordingofpurchasesunderaperpetualinventorysystem.Madeforcashorcredit(onaccount).Normallyrecordedwhenearned,usuallywhengoodstransferfromsellertobuyer.Salesinvoiceshouldsupporteachcreditsale.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Illustration5-4TwoJournalEntriestoRecordaSaleCashorAccountsreceivable XXXSales XXXRecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.#1Costofgoodssold XXXMerchandiseinventory XXX#2SellingPriceCostE5-5

PresentedaretransactionsrelatedtoWheelerCompany.1.OnDecember3,WheelerCompanysold$500,000ofmerchandisetoHashmiCo.,terms2/10,n/30,FOBshippingpoint.Thecostofthemerchandisesoldwas$350,000.2.OnDecember8,HashmiCo.wasgrantedanallowanceof$27,000formerchandisepurchasedonDecember3.3.OnDecember13,WheelerCompanyreceivedthebalanceduefromHashmiCo.Instructions:PreparethejournalentriestorecordthesetransactionsonthebooksofWheelerCompanyusingaperpetualinventorysystem.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.E5-5

PreparethejournalentriesforWheelerCompany.1. OnDecember3,WheelerCompanysold$500,000ofmerchandisetoHashmiCo.,terms2/10,n/30,FOBshippingpoint.Costofmerchandisesoldwas$350,000.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Accountsreceivable 500,000Dec.3Sales 500,000Costofgoodssold 350,000Merchandiseinventory 350,000“Flipside”ofpurchasereturnsandallowances.Contra-revenueaccount(debit).Salesnotreduced(debited)because:wouldobscureimportanceofsalesreturnsandallowancesasapercentageofsales.coulddistortcomparisonsbetweentotalsalesindifferentaccountingperiods.SalesReturnsandAllowances

RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.E5-5

PreparethejournalentriesforWheelerCompany.2.OnDecember8,HashmiCo.wasgrantedanallowanceof$27,000formerchandisepurchasedonDecember3.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Salesreturnsandallowances 27,000Dec.8Accountsreceivable 27,000E5-5

PreparethejournalentriesforWheelerCompany.2.Variation

OnDec.8,HashmiCo.returnedmerchandiseforcreditof$27,000.TheoriginalcostofthemerchandisetoWheelerwas$18,900.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Salesreturnsandallowances 27,000Dec.8Accountsreceivable 27,000Merchandiseinventory 18,900Costofgoodssold 18,900Thecostofgoodssoldisdeterminedandrecordedeachtimeasaleoccursin:periodicinventorysystemonly.aperpetualinventorysystemonly.bothaperiodicandperpetualinventorysystem.neitheraperiodicnorperpetualinventorysystem.ReviewQuestionRecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Offeredtocustomerstopromotepromptpayment.“Flipside”ofpurchasediscount.Contra-revenueaccount(debit).SalesDiscount

RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.E5-5

PreparethejournalentriesforWheelerCompany.3.OnDecember13,WheelerCompanyreceivedthebalanceduefromHashmiCo.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Cash 463,540Dec.13Accountsreceivable 473,000Salesdiscounts 9,460** [($500,000–$27,000)X2%]***** ($500,000–$27,000)***** ($473,000–$9,460)E5-5

Variation

PreparethesalesrevenuesectionoftheincomestatementforWheelerCompany.RecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Q5-9JoanRolandbelievesrevenuesfromcreditsalesmaybeearnedbeforetheyarecollectedincash.Doyouagree?Explain.DiscussionQuestionRecordingSalesofMerchandiseSO3Explaintherecordingofsalesrevenuesunderaperpetualinventorysystem.Agree.Inaccordancewiththerevenuerecognitionprinciple,salesrevenuesaregenerallyconsideredtobeearnedwhenthegoodsaretransferredfromthesellertothebuyer;Thatis,whentheexchangetransactionoccurs.Theearningofrevenueisnotdependentonthecollectionofcreditsales.Generallythesameasaservicecompany.Oneadditionaladjustmenttomaketherecordsagreewiththeactualinventoryonhand.InvolvesadjustingMerchandiseInventoryandCostofGoodsSold.AdjustingEntriesCompletingtheAccountingCycleSO4Explainthestepsintheaccountingcycleforamerchandisingcompany.Closeallaccountsthataffectnetincome.ClosingEntriesCompletingtheAccountingCycleSO4Explainthestepsintheaccountingcycleforamerchandisingcompany.E5-8

PresentedisinformationrelatedtoRogersCo.forthemonthofJanuary2008.Rogersusestheperpetualinventorymethod.Required: (a)Preparethenecessaryadjustingentryforinventory. (b)Preparethenecessaryclosingentries.

E5-8

(a)Preparethenecessaryadjustingentryforinventory.CompletingtheAccountingCycleSO4Explainthestepsintheaccountingcycleforamerchandisingcompany.Costofgoodssold 600 Merchandiseinventory 600Sales 350,000 Incomesummary 350,000Incomesummary 341,600 Costofgoodssold 218,600 Freight-out 7,000 Insuranceexpense 12,000Incomesummary 8,400 Retainedearnings 8,400 Rentexpense 20,000

E5-8

(b)Preparethenecessaryclosingentries.CompletingtheAccountingCycleSO4Explainthestepsintheaccountingcycleforamerchandisingcompany. Salaryexpense 61,000 Salesdiscounts 10,000 Salesreturns 13,000Showsseveralstepsindeterminingnetincome.Twostepsrelatetoprincipaloperatingactivities.Distinguishesbetweenoperatingandnon-operatingactivities.Multiple-StepIncomeStatementFormsofFinancialStatementsSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.SO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.SO6Explainthecomputationandimportanceofgrossprofit.FormsofFinancialStatementsIllustration5-11KeyItems:NetsalesGrossprofitGrossprofitrateIllustration5-8SO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.FormsofFinancialStatementsIllustration5-11KeyItems:NetsalesGrossprofitGrossprofitrateOperatingexpensesFormsofFinancialStatementsSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.KeyItems:NetsalesGrossprofitGrossprofitrateOperatingexpensesNonoperatingactivitiesNetincomeIllustration5-11Themultiple-stepincomestatementforamerchandisershowseachofthefollowingfeaturesexcept:grossprofit.costofgoodssold.asalesrevenuesection.investingactivitiessection.ReviewQuestionFormsofFinancialStatementsSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.SubtracttotalexpensesfromtotalrevenuesTworeasonsforusingthesingle-stepformat:Companydoesnotrealizeanytypeofprofituntiltotalrevenuesexceedtotalexpenses.Formatissimplerandeasiertoread.Single-StepIncomeStatementFormsofFinancialStatementsSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.Single-StepFormsofFinancialStatementsSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.Illustration5-12FormsofFinancialStatementsIllustration5-13ClassifiedBalanceSheetSO5Distinguishbetweenamultiple-stepandasingle-stepincomestatement.PeriodicSystemSeparateaccountsusedtorecordpurchases,freightcosts,returns,anddiscounts.Companydoesnotmaintainarunningaccountofchangesininventory.Endinginventorydeterminedbyphysicalcount.DeterminingCostofGoodsSoldUn