11 - 1 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Preparing a Worksheet for

a Merchandise Company
Chapter 11
11 - 2 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 1
Figuring adjustments for
merchandise inventory, unearned
rent, supplies used, insurance
expired, depreciation expense,
and salaries accrued.
11 - 3 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Beginning inventory
Net purchases
+
=
Cost of goods sold
Ending inventory

Learning Unit 11-1 (Adjusting
for Merchandise Inventory)
Freight-in
+
11 - 4 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-1 (Adjusting
for Merchandise Inventory)
What are some adjustments
for merchandise inventory?
Credit Beginning Inventory to remove
this old inventory balance.
This is the balance that will
be on the balance sheet.
Debit Ending Inventory for the counted
and priced amount to leave this
balance in the Inventory account.
11 - 5 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-1 (Adjusting
for Merchandise Inventory)
Merchandise Inventory
Balance 19,000
Income Summary
Adjustment 19,000
Adjustment 19,000
Adjustment 4,000
Adjustment 4,000
11 - 6 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
First Month
BALANCE SHEET
Assets
Beginning inventory
$19,000 (assume sold)
Second Month
BALANCE SHEET
Assets
Beginning inventory
$4,000
INCOME STATEMENT
Cost of goods sold

Beginning inventory $19,000

Less ending inventory $ 4,000
Learning Unit 11-1 (Adjusting
for Merchandise Inventory)
11 - 7 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-1
(Adjusting for Unearned Rent)
Suppose that Arts received $600 in advance
for renting a room to Jesse for three months.
Is the $600 considered rental revenue?
This account is used to record rent payments
received from renters in advance.
No. Unearned Rent is a liability account.
11 - 8 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-1
(Adjusting for Unearned Rent)
The rent will not be earned
until the months have gone by.
The rental money will be recorded as revenue
only after the unit is used for each month.
Unearned Rent and Revenue
What accounts will be affected
at the end of the month?
11 - 9 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 2
Preparing a worksheet for
a merchandise company.
11 - 10 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Mortgage Payable
Interest Expense
Unearned Revenue
11 - 11 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Unearned Rent
200 600
400
Rental Income
200
Balances on
adjusted
trial balance
11 - 12 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Adjustment for Rental Income
Accounts Affected Category Rules
Unearned Rent Liability Dr. 200
Rental Income Revenue Cr. 200
11 - 13 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Accounts Affected Category Rules
Supplies Expense Expense Dr. 500
Supplies Asset Cr. 500
Adjustment for Supplies
11 - 14 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Accounts Affected Category Rules
Insurance Expense Expense Dr. 300
Prepaid Insurance Asset Cr. 300
Adjustment for Insurance Expired
11 - 15 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
Accounts Affected Category Rules
Salaries Expense Expense Dr. 600
Salaries Payable Liability Cr. 600
Adjustment for Salaries Accrued
11 - 16 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
The worksheet provides the information
needed to prepare the expanded income
statement needed for a merchandising company.
11 - 17 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 11-2
(Completing the Worksheet)
The income statement columns balance with
a net income if the columns must
have a debit entry to balance them.
The income statement columns
balance with a net loss if the columns
must have a credit entry to balance.
11 - 18 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Worksheet Example
Account Title
Adjusted
Trial Balance
Dr. Cr.
Income
Statement
Dr. Cr.
Balance
Sheet
Dr. Cr.
Cash
Mdse. Inventory
Receivables
Supplies
Equipment
Accounts Payable
Capital
Sales
Sales Returns
Purchases
Purchases Returns
Totals
4,065
1,850
200
100
1,200



200
1,205

8,820





320
5,000
3,450


50
8,820








200
1,205

1,405







3,450


50
3,500
4,065
1,850
200
100
1,200






7,415





320
5,000




5,320
2,095
3,500

3,500

7,415
2,095
7,415
Net income
11 - 19 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Sales revenue $3,450
Sales discounts 0
Returns and allowances 200
Net sales revenue $3,250
Cost of goods sold 1,155
Gross profit $2,095
Worksheet Example
11 - 20 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Gross Profit

Operating Expenses
=
Net Income
Worksheet Example
11 - 21 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Perpetual Inventory
The Purchases account, Purchases Returns
and Allowance account, and the Purchases
Discount account are not used.
Merchandise Inventory is debited
when purchases are made.
11 - 22 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Perpetual Inventory
Merchandise Inventory is
credited when sales are made.
Merchandise Inventory is credited for
any discounts, returns, or allowances.
11 - 23 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of Chapter 11