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1. BE.05-05
Transactions for buyer and seller

Instructions

Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the goods sold is $67,200. Shore Co. paid freight of $1,800.

Journalize the entries for Shore and Blue Star for the sale, purchase, and payment of amount due. Refer to the appropriate company’s Chart of Accounts for exact wording of account titles.

Chart of Accounts-Shore Co.

CHART OF ACCOUNTS

Shore Co.

General Ledger

ASSETS REVENUE

110 Cash 410 Sales

121 Accounts Receivable-Blue Star Co. 610 Rent Revenue

125 Notes Receivable

130 Inventory EXPENSES

140 Office Supplies 501 Cost of Goods Sold

141 Store Supplies 521 Delivery Expense

142 Prepaid Insurance 522 Advertising Expense

180 Land 524 Depreciation Expense-Store Equipment

192 Store Equipment 525 Depreciation Expense-Office Equipment

193 Accumulated Depreciation-Store Equipment 531 Rent Expense

194 Office Equipment 533 Insurance Expense

195 Accumulated Depreciation-Office Equipment 534 Store Supplies Expense

535 Office Supplies Expense

LIABILITIES 536 Credit Card Expense

210 Accounts Payable 539 Miscellaneous Expense

218 Sales Tax Payable 710 Interest Expense

219 Customer Refunds Payable

220 Unearned Rent

221 Notes Payable

EQUITY

310 Common Stock

311 Retained Earnings

312 Dividends

313 Income Summary

Chart of Accounts-Blue Star Co.

CHART OF ACCOUNTS

Blue Star Co.

General Ledger

ASSETS REVENUE

110 Cash 410 Sales

120 Accounts Receivable 610 Rent Revenue

125 Notes Receivable

130 Inventory EXPENSES

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140 Office Supplies 501 Cost of Goods Sold

141 Store Supplies 521 Delivery Expense

142 Prepaid Insurance 522 Advertising Expense

180 Land 524 Depreciation Expense-Store Equipment

192 Store Equipment 525 Depreciation Expense-Office Equipment

193 Accumulated Depreciation-Store Equipment 531 Rent Expense

194 Office Equipment 533 Insurance Expense

195 Accumulated Depreciation-Office Equipment 534 Store Supplies Expense

535 Office Supplies Expense

LIABILITIES 536 Credit Card Expense

211 Accounts Payable-Shore Co. 539 Miscellaneous Expense

218 Sales Tax Payable 710 Interest Expense

219 Customer Refunds Payable

220 Unearned Rent

221 Notes Payable

EQUITY

310 Common Stock

311 Retained Earnings

312 Dividends

313 Income Summary

Journal-Shore Co.

Journalize the entries for Shore Co. for the sale and payment of the amount due. For grading purposes, use December 31 as the date for all transactions. Refer to the appropriate company’s
Chart of Accounts for exact wording of account titles.

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JOURNAL ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

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Journal-Blue Star Co.

Journalize the entries for Blue Star Co. for the purchase and payment of the amount due. For grading purposes, use December 31 as the date for all transactions. Refer to the appropriate
company’s Chart of Accounts for exact wording of account titles.

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JOURNAL ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

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2. EX.05-01
Determining Gross Profit

During the current year, merchandise is sold for $11,750,000. The cost of the goods sold is $7,050,000.

a. What is the amount of the gross profit?

$

b. Compute the gross profit percentage (gross profit divided by sales). Round to the nearest whole number.

c. When will the income statement report net income?

3. EX.05-02.Algo (Algorithmic)
Determining Cost of Goods Sold

For a recent year, TechMart reported sales of $45,366 million. Its gross profit was $11,795 million.

What was the amount of TechMart's cost of goods sold? (Enter answer in millions.)
$
million

4. EX.05-04
Purchase-Related Transactions

A retailer is considering the purchase of 250 units of a specific item from either of two suppliers. Their offers are as follows:

Supplier One: $400 a unit, total of $100,000, 1/10, n/30, no charge for freight.
Supplier Two: $399 a unit, total of $99,750, 2/10, n/30, plus freight of $975.

Price of Supplier One:

$

Price of Supplier Two:

$

Which of the two offers, Supplier One or Supplier Two, yields the lower price?

5. EX.05-07
Purchase-related transactions

Instructions

Journalize entries for the following related transactions of Lilly Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles.

A. Purchased $36,000 of merchandise from Schell Co. on account, terms 1/10, n/30.

B. Paid the amount owed on the invoice within the discount period.

C. Discovered that $9,000 of the merchandise purchased in (A) was defective and returned items, receiving credit.

D. Purchased $5,000 of merchandise from Schell Co. on account, terms n/30.

E. Received a refund from Schell Co. for return in (C) less the purchase in (D).

Chart of Accounts

CHART OF ACCOUNTS

Lilly Heating & Air Company

General Ledger
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General Ledger

ASSETS REVENUE

110 Cash 410 Sales

120 Accounts Receivable 610 Rent Revenue

125 Notes Receivable

130 Inventory EXPENSES

140 Office Supplies 501 Cost of Goods Sold

141 Store Supplies 521 Delivery Expense

142 Prepaid Insurance 522 Advertising Expense

180 Land 524 Depreciation Expense-Store Equipment

192 Store Equipment 525 Depreciation Expense-Office Equipment

193 Accumulated Depreciation-Store Equipment 531 Rent Expense

194 Office Equipment 533 Insurance Expense

195 Accumulated Depreciation-Office Equipment 534 Store Supplies Expense

535 Office Supplies Expense

LIABILITIES 536 Credit Card Expense

211 Accounts Payable-Schell Co. 539 Miscellaneous Expense

218 Sales Tax Payable 710 Interest Expense

219 Customer Refunds Payable

220 Unearned Rent

221 Notes Payable

EQUITY

310 Common Stock

311 Retained Earnings

312 Dividends

313 Income Summary

Journal

Journalize entries for the transactions of Lilly Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles. For grading purposes use December 31 as the date for

all transactions.

PAGE 10

JOURNAL ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

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6. DE.06-03
Use the Dynamic Exhibit to answer the following questions.

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1. When the number of units sold on November 21 is 36, the cost of merchandise sold on November 21 is $
.

2. When the number of units sold on November 21 is 36, the ending inventory on November 30 is $
.

3. When the number of units sold on November 21 is 8, the cost of merchandise sold on November 21 is $
.

4. When the number of units sold on November 21 is 50, the ending inventory on November 30 is $
.

7. BE.06-01
Cost Flow Methods

The following three identical units of Item P401C are purchased during April:

Item Beta Units Cost

April 2 Purchase 1 $100

15 Purchase 1 120
20 Purchase 1 140
Total 3 $360

Average cost per unit $120 ($360 ÷ 3 units)

Assume that one unit is sold on April 27 for $300.

Determine the gross profit for April and ending inventory on April 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost method.

Gross Profit Ending Inventory

a. First-in, first-out (FIFO) $ $
b. Last-in, first-out (LIFO) $ $
c. Weighted average cost $ $

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