Professional Documents
Culture Documents
Chapter 6
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin Copyright 2012 The McGraw-Hill Companies, Inc.
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Merchandising Company
Manufacturing Company
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Wholesalers buy merchandise from several different manufacturers and then sell this merchandise to several retailers.
Cost of goods sold represents the expense of goods that are sold to customers.
1,000 Subsidiary Ledger Heather Jacobs Company Debit Credit Balance 7,000 2,000
7,000 5,000
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Sept. 5 Inventory
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Retail
Credit
GENERAL JOURNAL
Date Account Titles and Explanation Cash Debit 3,000 3,000 Credit
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GENERAL JOURNAL
Date Account Titles and Explanation Accounts Receivable (ABC Radios) Debit 500 500 Credit
Sept. 22 Cash
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On December 31, Worley Co. counts its inventory. An inventory shortage of $2,000 is discovered. GENERAL JOURNAL
Date Account Titles and Explanation Inventory Debit 2,000 2,000 Credit
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Retail
Credit
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GENERAL JOURNAL
Date Account Titles and Explanation Cash Debit 3,000 3,000 Credit
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GENERAL JOURNAL
Date Account Titles and Explanation Accounts Receivable (ABC Radios) Debit 500 500 Credit
Sept. 22 Cash
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Inventory (beginning of the year) Add: Purchases Cost of goods available for sale Less: Inventory (end of year) Cost of goods sold
Party Supply must record the ending GENERAL JOURNAL inventory amount.
Date Account Titles and Explanation Cost of Goods Sold Debit 12,000 12,000
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Credit
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2/10, n/30
Percentage of Discount # of Days Discount Is Available Otherwise, the Full Amount Is Due # of Days when Full Amount Is Due
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GENERAL JOURNAL
Date Account Titles and Explanation Accounts Payable (Kid's Clothes) Debit 3,920 3,920 Credit
July 6 Inventory
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Credit
Nonoperating Expense
Credit
July 6 Inventory
Credit
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Credit terms and merchandise returns affect the amount of revenue earned by the seller.
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Sales
On August 2, Kids Clothes sold $2,000 of merchandise to Jack & Jill, Inc. on credit terms 2/10, n/30. Kids Clothes originally paid $1,000 for the merchandise. Because Kids Clothes uses a perpetual inventory system, they must make two entries. GENERAL JOURNAL
Date Account Titles and Explanation Sales 2 Cost of Goods Sold Inventory 1,000 1,000
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Debit 2,000
Credit 2,000
Debit 500
Credit 500
Sales Discounts
On July 6, Kids Clothes sold $4,000 of merchandise to Jack & Jill, Inc. on credit with terms of 2/10, n/30. The merchandise originally cost Kids Clothes $2,000. Because Kids Clothes uses a perpetual inventory system, they must make two entries. GENERAL JOURNAL
Date Account Titles and Explanation Sales 6 Cost of Goods Sold Inventory 2,000 2,000
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Debit 4,000
Credit 4,000
Sales Discounts
On July 15, Kids Clothes receives the full amount due from Jack & Jill, Inc. from the July 6 sale. Prepare the journal entry for Kids Clothes.
Contra-revenue
Date July 15 Cash Sales Discounts Accounts Receivable (Jack & Jill, Inc.)
GENERAL JOURNAL
Credit
Sales Discounts
Now, assume that it wasnt until July 20 that Kids Clothes received the full amount due from Jack & Jill, Inc. from the July 6 sale. Prepare the journal entry for Kids Clothes.
GENERAL JOURNAL
Date July 20 Cash Accounts Receivable (Jack & Jill, Inc.) Account Titles and Explanation Debit 4,000 4,000 Credit
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Delivery Expenses
Delivery costs incurred by sellers are debited to Delivery Expense, an operating expense.
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Credit
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Financial Analysis
Gross Profit Margins
Gross profit z Net sales Overall gross profit margin Gross profit margins by department and products
Net Sales
Trends over time Comparable store sales Sales per square foot of selling space
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End of Chapter 6
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